A pip is the smallest change of price for any Foreign Currency. The Foreign Currency can move up or down by the smallest margin which is the "pip". When you trade in Forex, you monitor how the pips rise and drop and this is what determines your investment. The pip is an abbreviation of "Price Interest Point", and this is why another name used for pips is points.
Even though a pip is only a small amount of money but when you consider the volumes of foreign currency traded a few pips can mean serious cash fluctuations. Each serious trader needs to know how to calculate the change from pips to the actual sums invested. Some online Foreign currency trading agents offer such calculators also in the account. You should consider these and other advanced functions when selecting the broker you want to use.
An important concept that concerns pips is called the “Spread”. This is the pip difference between the buying price and the selling price for the currency being traded. When you buy foreign currency it costs you more than to sell it and this is called the spread.
Another term used in forex trading is “Ticks” which are a measure of the smallest amount of time that exists between two currency trades. This time frame can be a short time period of a fraction of a second for major currencies, or can be a time frame of a few hours for less popular currencies.
As you trade in foreign currencies you will also come across terms like “rising quote” or “weakening quote” quite a lot. A rising currency trading quote means that the base currency has appreciated, so you can buy more of the pricing currency with it. A weakening quote means the exact opposite. So while the direction of the rising quote is up for the base currency, the direction of the weakening quote is down.
Currency trading quotes that do not involve the dollar are referred to as cross currencies. You might also see a double quote, one marked as 'ask' and the other as 'bid'. The 'bid' quote represents the price you at which you can sell the base currency and the 'ask price' represents the price at which you can buy the base currency.