Lesson 3 — Forex Market Language
Learn how forex pairs work and understand pips, base currency, quote currency, sessions, spread, and liquidity.
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Login to Track ProgressThe forex market is built around currency pairs. Every forex chart represents the value of one currency relative to another. When traders look at EUR/USD, GBP/USD, USD/JPY, or any other pair, they are analyzing a relationship between two currencies, not a single independent asset.
This lesson explains the language of forex: base currency, quote currency, pip, lot size, spread, leverage, and trading sessions. These terms matter because they directly affect risk calculation and execution quality. A trader who does not understand pip value or spread may miscalculate risk before the trade even begins.
Students also learn why market sessions matter. London, New York, and Asian sessions often behave differently because liquidity and participation change throughout the day. Professional forex analysis requires understanding not only direction, but also timing, volatility, and liquidity behavior.
1. Pick three forex pairs and identify the base and quote currency.
2. Compare one pair during London and New York sessions.
3. Write a simple explanation of pip and spread.
- 1. What is a currency pair?
- 2. What is the base currency?
- 3. What is the quote currency?
- 4. Why do trading sessions matter?
- 5. Why is spread important for execution?