In Forex, one currency is bought against selling of another currency. A quotation of two different currencies is depicted by a Currency Pair. The first currency is called the Base (or Transaction) Currency and the second one in the pair is called Quote (or Counter) Currency. It simply means how many units of a counter currency are required to buy a unit of base currency. The four most important currency pairs are USD/EUR, USD/CHF, JPY/USD, and USD/GBP.
The price of a pair is written in the decimal form with four digits to the right and one digit to the left of the decimal point. The base currency is said to be getting stronger than the counter currency if the value of the quote moves from a lower value to a higher value. The opposite happens if the quote value shifts from a higher to a lower value. A trader in the long position makes profit if the price of a currency pair rises. But a trader in the short position loses out on money in case of price rise.
The price movements shown by the Exchange Rate in the Forex Trading are measured by the Percentage In Point (pip). Generally all the pairs show a pip equal to 0.0001. But the USD/JPY shows and exceptional pip equal to 0.01.
The Ask price can be defined as the price at which a Broker sells the currency price and the Trader buys one. The Bid price is defined as the price at which the Broker buys a currency pair and the Trader sells one.
The difference between the Bid price and the Ask price is called a Spread, which expressed in terms of PIP. A Cross Rate currency pair does not include USD or EUR. Pairs involving EUR are called Euro Crosses.
During a transaction a deposit is required from the Trader and the ratios between the contract value and the deposit is called Leverage. In order to cover the brokers credit risk, the opening of a position requires an initial investment called Margin. The inverse value of leverage gives the percentage margin requirement.
The most traded and liquid currency pairs are called Majors. Any kind of transaction, involving Majors, account for 90% of the total Forex trading. The EUR/USD and USD/JPY are the most important currency pairs that are actively traded. The GBP/USD rank third, whereas EUR/JPY rank fourth.
The Forex and Contract for Difference Trading involves a high level of risk to your capital investments. This makes it possible for you to lose out on money and hence prove to be unsuitable for certain traders. You should thus seek advice from people who are already into this and carefully go through all Risk Warning Notices. - 23309
The price of a pair is written in the decimal form with four digits to the right and one digit to the left of the decimal point. The base currency is said to be getting stronger than the counter currency if the value of the quote moves from a lower value to a higher value. The opposite happens if the quote value shifts from a higher to a lower value. A trader in the long position makes profit if the price of a currency pair rises. But a trader in the short position loses out on money in case of price rise.
The price movements shown by the Exchange Rate in the Forex Trading are measured by the Percentage In Point (pip). Generally all the pairs show a pip equal to 0.0001. But the USD/JPY shows and exceptional pip equal to 0.01.
The Ask price can be defined as the price at which a Broker sells the currency price and the Trader buys one. The Bid price is defined as the price at which the Broker buys a currency pair and the Trader sells one.
The difference between the Bid price and the Ask price is called a Spread, which expressed in terms of PIP. A Cross Rate currency pair does not include USD or EUR. Pairs involving EUR are called Euro Crosses.
During a transaction a deposit is required from the Trader and the ratios between the contract value and the deposit is called Leverage. In order to cover the brokers credit risk, the opening of a position requires an initial investment called Margin. The inverse value of leverage gives the percentage margin requirement.
The most traded and liquid currency pairs are called Majors. Any kind of transaction, involving Majors, account for 90% of the total Forex trading. The EUR/USD and USD/JPY are the most important currency pairs that are actively traded. The GBP/USD rank third, whereas EUR/JPY rank fourth.
The Forex and Contract for Difference Trading involves a high level of risk to your capital investments. This makes it possible for you to lose out on money and hence prove to be unsuitable for certain traders. You should thus seek advice from people who are already into this and carefully go through all Risk Warning Notices. - 23309
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