Forex Trading – All about a Currency exchange Quote. The word Forex is derived from the words “Foreign Exchange”. Unlike any other money market worldwide , Foreign exchange is open 24 hours every day where there is always a major financial center open where banks, dealers, hedge funds, companies, individual financiers and investors are trading currencies.
The cumulative purchase and sell of a currency causes the value of your Currency exchange investment to move either down or up. There are countless elements that cause the fluctuation of exchange rate. A country's political, social and basic economic environment and their central banking organizations fiscal policy, rate of interest adjustment are some of the common factors. To have a clearer understanding the way the forex rate can affect the cost of your Currency exchange investment, this text will focus on the subject of Forex Quote.
Currencies are traded in pairs and each currency has its own symbol. For the Euro dollar dollar- it is EUR, Japanese Yen – it is JPY, for the Pounds Sterling – it is GBP, and for the Swiss Franc – it is CHF. Thus, EUR/USD would be Euro-Dollar pair. GBP/$ would be pounds Sterling-Dollar pair and Greenbacks/CHF would be Dollar-Swiss Franc pair and so on and so on.
You'll always see the Dollars quoted first with few exceptions such as Pounds Sterling, EU Buck Dollar, Australia Buck (AUD) and New Zealand Dollar (NZD. The 1st currency quoted is called the base currency. This is not a surprise as the U.S. Greenback is regarded as the central currency of the Currency market and is involved in virtually 90% of all Forex transactions.
So how are these currency pairs quoted on the Forex market? You'll see two numbers on all Foreign exchange quotes. The first number is known as the bid and the second's known as the offer (or the ASK) cost. Take for example EURUSD, you will see 1.4625/1.4630. The first quote of 1.4625 is the bid price, the price where traders are prepared to buy Euro dollar against the USD Buck. The second number 1.4630 is the offer or ask price and it is the price traders are prepared to sell the EU Buck against the US Dollar. You'll observe that there's a difference between the bid and the offer cost. This difference is commonly known as the spread. Based mostly on the prior EUR/USD quote, you know that 1 Euro dollar is equal 1.4625 US dollar.
The way profit is measured of a currency is by “pips” or point. PIP is the acronym for price interest point. If the EUR/USD moves from 1.4625 to 1.4655 that is 50 pips. A pip or 0.001 is the last decimal place of a currency quotation with the single exception of the Japanese Yen and Yen cross rates. A price movement for the USD/JPY from 111.10 to 111.60 will be 50 pips.
The objective and goal for all Currency exchange Traders are to benefit from foreign currency movements. The advantages of trading Forex are immense and the sum of money you can earn can be life changing and ultimately leads you to realize financial independence. This requires continuous and adequate understanding and coaching in Foreign exchange education. This education can often include understanding technical analysis, chart pattern and formation, trade management such as stop loss and profit target and cashflow control. And if you invest and get the right Forex Trading data, you can enjoy long term currency trading success.
Author: Todd WatsonThis author has published 2 articles so far.