Forex exchange trading is not only the largest market in the world with a daily turnover in excess of three trillion dollars, but it is also the fastest traded market amongst private traders and speculators. In this market, there is one concept that seems to override everything else – timing.

Currency trading involves the exchange of the value of money in one country against the value of money in another country. For instance, when a trader decides to buy US dollars, then they can do so using Pound Sterling for paying. The trade is therefore, done using two currencies, also referred to as a currency pair or a cross currency. In this case, a Forex trader will be long one currency, which he or she bought and will be short another currency, which they sold.

The nature of Forex trade is rising and falling rates of exchange that present an opportunity for speculators to trade on the market direction of different currency pairs. When one currency moves, a speculator has the opportunity to make money from it. Trade currency and price currency are used to refer to each currency within one cross.

It is worth noting that Forex trade, unlike equities or commodities, is conducted over the counter. As such, currencies are categorized into three bands, which include the majors, minors and the exotic currencies. These are priced to four decimal places, with their movement tied to the last decimal place. The figure is called one basis point or a PIP.