A currency pair does not have one price. It has two, and the difference between them is the first cost of trading. Before any strategy discussion is worth your time, the quoting conventions need to be automatic, because almost every avoidable error on a chart begins with a misread number.
Two currencies, one trade
Buying a pair is two transactions at once: you take a position in one currency and the opposite position in the other. In EURUSD, the euro is the base currency, named first, and the US dollar is the quote currency, named second. A price of 1.0850 means one euro buys 1.0850 dollars.
So a long EURUSD position is long euros and short dollars. If you believe the euro will strengthen against the dollar, that is the direction. If instead you think the dollar will weaken, you are describing the same trade from the other side. This is why a pair has no independent existence: there is no "the euro", only the euro relative to something.
Bid, ask and the spread
Quotes arrive as a pair of numbers. The bid is the price at which the market buys the base currency from you; the ask is the price at which it sells it to you. The bid is always the lower figure, and the gap between them is the spread.
That gap explains why a fresh position opens at a loss. You buy at the ask and, at the same instant, could sell at the bid. The trade does not need the market to move against you for the figure to be red; it needs the market to move in your favour by the spread before the position is level. Brokers are paid largely through this gap, which is why a wider spread on a quiet pair is not a fault but a description of the liquidity available.
Pips, and where the convention changes
A pip is the conventional smallest quoted move. For most pairs it is the fourth digit after the decimal point, so a shift from 1.0850 to 1.0851 is one pip. Many brokers display a fifth digit, the pipette, worth a tenth of a pip, purely for precision.
Yen pairs break the pattern. They are quoted to two digits, which makes a pip 0.01 rather than 0.0001. A move on USDJPY from 149.50 to 150.00 is fifty pips, not five hundred. Someone who has learned on dollar pairs and applies the same habit to a yen pair will size a stop ten times too wide, or read a target ten times too small.
Metals and indices are different again, because they are not currency pairs at all. XAUUSD is one troy ounce of gold in dollars, and brokers vary in how they express a point on it. The pip definition for gold has to come from the contract specification rather than from memory, which is exactly the kind of assumption we would rather state on screen than leave to the reader.
What a pip is worth
The arithmetic is short. One standard lot is 100,000 units of the base currency. On a four-digit pair, one pip is 0.0001, and 0.0001 multiplied by 100,000 is ten units of the quote currency. So on EURUSD a standard lot moves ten dollars per pip, a mini lot one dollar and a micro lot ten cents.
Two consequences follow. First, pip value is denominated in the quote currency, so if your account is in a third currency the figure is converted at a rate you do not control, and it drifts as that rate moves. Second, exposure depends on the lot size and the contract, not on the number of pips you traded. The same stop distance in pips is a very different money amount at 0.01 lots and at 1.00 lots.
Why this deserves the attention
None of the above is a trading opinion. It is the reading of the display, and it is checkable in a few minutes on a demo account against your own platform. When a trading result is surprising, the first question should be whether the numbers were read the same way by both parties. A great deal of analysis in trading forums is two people disagreeing about a strategy while quietly using different pip conventions.
Risk disclosure
Trading on margin involves exposure many times larger than the deposit behind it, and losses can accumulate quickly and exceed the funds held. Currency and metals prices move for reasons no participant fully controls. This article explains quotation mechanics only; it is not advice, and nothing in it should be read as an expectation of profit. Capital is at risk and you should never trade funds you cannot afford to lose.