Currency Trading - Start by Learning the Basics - Part One
Currency Trading - Start by learning the basics - part one.
Before adventuring into the Forex market we need to make sure we understand the basics. We’ll start by explaining what is traded in the Forex market.
The instrument traded by Forex traders and investors are currency pairs. A currency pair is the exchange rate of one currency over another. The most traded currency pairs are:
EUR/USD: EURO
GBP/USD: POUND
USD/CAD: CANADIAN DOLLAR
USD/JPY: YEN
USD/CHF: SWISS FRANC
AUD/USD: AUSSIE
These currency pairs generate up to 85% of the overall volume generated in the Forex market. If a trader GOES LONG or BUYS the Euro, he/she is simultaneously buying the EUR, (Euro) and selling the USD, (US dollar).
If the same trader GOES SHORT or SELLS the Aussie, he/she is simultaneously selling the AUD, (Aussie), and buying the USD, (US dollar).
The first currency of each currency pair is referred to as the base currency, while the second currency is referred to as the counter or quote currency. Each currency pair is expressed in units of the counter currency needed to get one unit of the base currency. If the price or quote of the EUR/USD is 1.2545, it means that 1.2545 US dollars are needed to get one EURO.
It is very important to understand every aspect of trading. Start first from the very basic concepts, then move on to more complex issues. Make sure you master every single aspect before adventuring into a live trading account.
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