Forex mechanics, end to end

In EUR/USD, EUR is the base (what you're buying) and USD is the quote (what you're paying with). The quote price says how many quote-currency units = 1 base.

A pair where you EARN swap when long (long high-rate, short low-rate) is carry-positive. Reversed = carry-negative.

Any FX pair not involving USD — derived from two USD legs (EUR/GBP = EUR/USD × USD/GBP).

Weighted-average exposure to multiple currencies. DXY is the most-watched basket (USD vs 6 major counterparts).

Statistical co-movement between FX pairs. Long-USD trades expressed across 5 majors are correlated bets, not 5 independent trades.

Three tiers of FX pairs: majors (USD vs G7), minors / crosses (no USD), exotics (USD vs EM).

Direct quote: USD is the quote currency (EUR/USD). Reverse quote: USD is the base (USD/JPY). Pip-value math differs between the two.

Officially floating exchange rate, but the central bank intervenes opportunistically to influence the level. Most EM currencies in practice.

The single most traded FX pair (~$1.4T daily). Tightest spreads, deepest book, anchor of every multi-pair FX strategy.

FX trade with settlement on a specific future date (not spot T+2). Price = spot + forward points reflecting interest-rate differential.

Option contract on an FX pair. Premium quoted in pips, strikes set vs forward, common structures include risk reversals and butterflies.

The 13:00-17:00 UTC window when both London and New York FX desks are active. Tightest spreads, deepest book, ~70% of daily FX volume.

Standard FX position unit. Standard = 100,000; mini = 10,000; micro = 1,000; nano = 100 base-currency units.

Cash-settled FX forward used for currencies where physical delivery is restricted (KRW, INR, TWD, BRL, RUB).

Same currency, two markets: CNY trades in mainland China under PBoC tight control; CNH trades offshore (Hong Kong) with broader market pricing. Spread between them is a stress signal.

A fixed-rate regime with a tolerance range (e.g., Hong Kong dollar 7.75-7.85 vs USD). Central bank intervenes whenever price approaches the band edge.

How many dollars a 1-pip move is worth on your position — the core position-sizing input in FX.

One tenth of a pip. The 5th decimal on majors (0.00001 on EUR/USD) or the 3rd on yen pairs (0.001 on USD/JPY).

Daily interest charge or credit applied to FX positions held past the 5pm ET cutoff — the cost (or income) of carry.

Standard FX settlement convention: spot trades settle 2 business days after execution. Drives the Wednesday rollover quirk.

Risk-free profit from pricing discrepancies across three currency pairs. Closed in milliseconds by HFT — retail can't capture but should understand.

Reverse-quoted major (USD base, JPY quote). Pips at 0.01. Pip value varies with rate. Carry-trade poster child.