Currencies are traded in dollar amounts called “lots.” At 100:1 leverage, one lot is equal to $ 1,000, which controls $ 100,000 of a given currency. This influence is known as “margin”, and some brokers will allow traders to take more of 100:1. This influence is one of the reasons why Forex trading has become so popular. Currencies are always traded in pairs. Each pair is unique notation that expresses that the coins are being negotiated.
The symbol for a currency pair will always be in the form of ABC / XYZ. ABC / XYZ is not a real currency pair, only one example of how currency pairs are priced in the market. In this particular example, ABC is the symbol of the currency of a country and XYZ is the symbol of the currency of another country. Here are some of the symbols used. There are symbols for other currencies, but these are the most marketing. USD – U.S. Dollar EUR – The currency of the European Union “EURO” GBP – British Pound Yen JPN – The Japanese CHF – Dollar Swiss Franc AUD – Australia CAD – Canadian Dollar As mentioned above, the currencies are traded in pairs in Forex trading.
Thus, a trade always compare one currency to another in terms of how the two currency prices move relative to each other. Some of the commonly traded pairs are: EUR / USD Euro / U.S. Dollar USD / JPY U.S. U.S. Dollar / Japanese Yen GBP / USD British Pound / U.S. Dollar USD / CAD U.S. / Canadian Dollar AUD / USD Australian Dollar / USD USD / CHF U.S. Dollar / Swiss Franc EUR / JPY Euro / Japanese Yen When you place an order to buy the EUR / USD, you are actually buying the EUR and sell USD. If you were to sell the pair, who would sell the EUR and buy USD. So if you buy or sell a currency pair, buy / sell the base currency.
You are always doing the opposite of what you did with the base currency with the currency. In the market Forex currencies are traded on a point of interest on prices (known as a PIP “) system. Each currency pair has its own pip value. Since we have a currency pair traded (ie, EUR / USD, EUR / AUD), we need a way to talk about their number of partners or price. When you see a budget, you’ll see something listed like this: USD / JPY: 118:51 / 55 The first component (before the slash) refers to the bid price (what you get in JPY when you sell USD). In this example, the bid price is 118.51. The second component (after the slash) is used to get the selling price (you have to pay in JPY if you buy USD). In this example, the sale price is 118.55. The difference between the bid and the sale price is known as the spread. For even more opinions, read materials from dayton kingery. In the example above, the spread is .04 or 4 points.