Since there is no formalized exchange in the forex market, brokers may have different buy and sell prices (known as quotes) at any point in time. The buy price is also known as the ask price and the sell price is called the bid. When shopping for a forex broker, it is important to compare their quotes to see who gives you the best pricing.


Rollover is unique to the forex market because each currency has an interest rate that is determined by the central bank of the country. By going long and short two currencies at the same time, forex traders are eligible to earn interest on the currency that they have bought and are required to pay interest on the currency that they have sold. For example, in 2010, Australia offered a much higher interest rate than the United States. Anyone going long Australian dollars against U.S. dollars would be eligible to earn interest on positions held overnight, whereas anyone who shorted the AUD/USD would be obligated to pay interest. The daily interest amount is calculated by subtracting the annual U.S. interest rate from the Australian rate and dividing it by the number of days in a year.


Like the word pip, the word spot is another forex-specific term that is used often by investors and traders. The spot price references the current market price; a spot trade is simply a transaction in the currency or commodity. Because currencies and commodities are traded often in the futures and options markets, spot can also mean the underlying or physical item that is being transacted.

Technical Analysis

Some forex investors will attempt to predict the direction where currencies are headed using fundamental analysis (FA), while others like to use technical analysis (TA), the art of chart reading. Many new traders actually prefer technicals over fundamentals because the same strategies and techniques that are used in stock trading can be used in currency trading. The forex market trades 24 hours a day, which means that the points in the charts are created using more samples, increasing its statistical significance. If you are unfamiliar with forex but very skilled at technical analysis, the best thing to do would be to use what you know, especially because this style of analysis is already a very popular trading and investment style among forex traders.

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