Forex Pairs

By Paul Bryan

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

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If you are looking for the top forex advice and tips and want to know more about trading currencies why not go to: Currency Pairs

New to Forex? Read This First...

By Ash Naeck

The word trading is as old as mankind himself and is still present in nowadays world. Although it comes in different forms and processes, trading carries the same principle that it did thousands of years ago, which is the exchange of a particular good for another.

The origins of trading come from a process named bartering. The barter process is simply an exchange of goods. In the early times, one would trade an apple, for argument sake, to get a potato in return.

In present time, bartering has evolved and though the principals are the same, trading one good for another is made easy by the use of money. Money is the medium that makes trading possible and without this piece of paper no goods and services may be acquired.

Trading in the world we live in has taken a new proportion which involves more than the exchange of goods and services only. The century that we live in has seen the birth of currency traders. They are the one who buys/sells the currency of one country to that of another country.

The market which is being referred to is the Forex market. The biggest most traded market on the planet. With a colossal US$ 3.5 Trillion traded every single day, this value is more significant when compared to all the other financial markets put together.

Millions of dollars are traded by major corporations daily. These companies form part of the wholesale market and comprises of banks and big hedge funds. They have the power to move the market from one direction to the other due to the large volume and amount of money traded on every single position taken. Those moves usually results in currencies going up and down in any single day thus changing the quotes of each currency throughout the day. The change in quotes most likely relates to profit made or loss incurred.

The forex market tends to be more attractive than most of the existing markets on the planet. The reason being is because the forex market is a 24-hour open market. A normal trading day starts in Sydney, then Tokyo, Europe, London and ends up in New York City which is the last market to close for the day.

The most traded pair on the currency market is the major which is made up of the EUR/USD, GBP/USD, USD/CHF and USD/JPY. The Yen pairs and the Commodity pairs come second on the list. These pairs are the GBP/JPY, EUR/JPY, AUD/USD, USD/CAD and NZD/USD.

My experience with trading begun when I was still in university, I had no clue of the dynamics of the market at his stage. Basically I was quite confused to how this process, which is the buying and selling of currencies, actually worked. After some readings, it all made sense. What I found is that not only could money help acquire goods and services but it could also be used to buy or sell another currency in some other countries.

Buying and selling currencies are undertaken by people known as forex traders. They simply take advantage of a falling currency or the appreciation of another currency to make money. A decent amount of money can be made using the technique of buying and selling currencies. Savvy forex traders make a great living doing just that.

It is very easy in the actual world we live to get involved in currency trading.

To get started, all you need is:

- A decent computer

- Acces to Internet

- Some money as start-up capital

- A broker

Looks quite easy in hind-sight, right?

Education is something that you will need to consider and I strongly recommend that you do educate yourself before jumping in this amazing forex adventure. With 5 years of trading under my belt I still learn new things every single day. Be humble, disciplined and teachable, do not try to make millions in a matter of days. Have a plan and a solid goal setting as this will pave your way to success. - 23309

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Want to find out more about forex trading, then visit Ash Naeck's site on how to choose the best Forex education for your needs!