By Cedric Welsch
Consumers often have many questions about the securities markets that can be ambiguous such as what is PIPs FOREX. With a little explanation however the mystery behind these terms can easily be uncovered. The same can be said about the FOREX market or currency exchange market and its different acronyms. For example one might have the question what is PIP’s FOREX? The following article will shed some light on what these terms are and how they are used in the currency markets.
The answer to what is PIPs FOREX literally defined refers to Percentage in Point’s Foreign Exchange. Yet this definition does nothing if not confuse you further. Let’s start with the FOREX market in general and some general concepts behind what it is and does. The foreign exchange market is a market where the currencies of the world are exchanged. The FOREX market is what is called an over the counter market meaning that there is no central exchange or entity governing transactions like the New York Stock Exchange governs stock and other securities transactions. Participants in this market include countries, central banks, speculators, commercial businesses, and smaller investors. There are different tiers or levels of the exchange market in which these investors participate. A common strategy for generating profits in this market is to borrow low yielding currencies and lend or invest in high yielding currencies.
Now let’s move on to what percentage in point actually means. When currencies are traded on the exchange, there are bid prices and offered prices. These prices may go by different terms however the process is still the same. When prices are quoted, they are done so to the fourth decimal point. For example if the American dollar’s price was quoted it may look something like 1.1479. This is true for all currencies with the exception of the Japanese Yen which is only quoted at two decimal places. Percentage in Point describes the gap, if any in the bid and offered prices. For example if the dollar was quoted at 1.1479 and the bid was 1.1475, we see that the spread is 4 pips wide.
As you can see, once the term is explained with a little background, it becomes much easier to understand. Most concepts of the market are fairly simple however weird terms and acronyms are applied that is not so simple. Knowing a little about what a particular market is and what it does can help answer burning questions. Now at long last you have your answer to what is PIPs FOREX.
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