Making Sense of Forex Quotes and Pips

This pip spread means that if you were to buy a great deal of currency, then sell it before there had been any change in the relative values of the two currencies, you would lose money on the trade, but the dealer would make money
from the trade. A Forex dealer makes their money from the Ask/Bid pip Spread. They are in a good position, as they stand to make money whether or not you do well with your trade.
A change of 1 in the last decimal place in a quote is named a Pip spread. this is the smallest amount by which the relative values of two currencies will change. Normally, a Forex brokers commission (the Ask/Bid Spread) will be somewhere between 2 and 5 Pips spread.

A movement of 20 to 50 Pips spread is a typical shift in the value of a quoted pair on any given day of Forex trading. The market can sometimes experience greater volatility though, with much larger movements being seen. In November 2007, there were some bigger shifts in the relative values of the US Dollar (USD) and the UK Pound (GBP), when the change in relative value of the two currencies was as much as 200 Pips spread on some days.
Usually, the daily changes in the Forex market are very small - so trading with very large amounts of money is the way to go if you are to make a sizable profit.

Let's say that the Euro (EUR) is expected to rise against the U.S. Dollar (USD). Based on this, you buy 100 Euros at a quote of EUR/USD = 1.4720/1.4725. A hundred Euros would cost you $147.25. If the Euro rises fifty Pips spread against the dollar the quote is now EUR/USD = 1.4770/1.4775.
Then say you sell your hundred Euros and buy U.S. Dollars. Your Euros would then fetch $147.70, or a profit of only $.045. Not much - even had you purchased a thousand Euros, you would still only have $4.50 to show for a day's trading. This is why Forex trading is generally done with much larger amounts of money.

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