- How Forex Trading Works
- Why currencies are always traded in pairs ?
- Forex Quote, Bid, Ask (Offer), and Spread
- High, Low, Open, and Close
- What is Long / Short ?
- What are point (pip) and Contract Size (Lot) ?
- Margin and Leverage Ratio ?
How Forex Trading Works Trading forex is exchanging 1 currency to another currency to get benefit from changing price rates of a currency, compared to the other one. For example :
A trader makes a profit by Buying Great Britain Pounds (GBP)
| Trader's Action | Great Britain Pounds (GBP) | US Dollars (USD) |
| A trader purchased 10,000 pounds in the beginning of February 2007 when the GBP/USD rate was 1.9800. | +10,000 | -19,800 * |
| The following day, the trader exchanged his 10,000 pounds back into US dollar at the market rate of 2.0000. | -10,000 | +20,000 ** |
| In this example, the trader earned a gross profit of $200. | 0 | +200 |
* $10,000 x 1.9800 = US $19,800
(The trader bought GBP of 10000 by selling USD of $19,800)
** $10,000 x 2.0000 = US $20,000
(The trader sold back GBP of 10000 by buying again USD of $20,000)
| Trader's Action | Meaning |
| Buy EUR/USD | Buy EUR by selling USD |
| Sell EUR/USD | Selling EUR to buy USD |
Why currencies are always traded in pairs ? While forex Trading Tutorial is about exchanging a currency to another currency simultaneously (buying 1 currency and selling the other at the same instance) that is why currencies are always quoted in pairs, for example GBP/USD, EUR/USD, etc. You will gain from differences of traded currency price rates
A currency pair depicts a quotation of two different currencies. The first currency in the pair is the base currency. The second currency in the pair is labelled quote currency or counter currency. Such a quotation depicts how many units of the counter currency are needed to buy one unit of the base currency.
Current forex quote displays GPB/USD = 1.8500, this means to BUY 1 pound GBP needs 1.85 USD. For example the quotation EUR/USD 1.2500, while Euro is the base currency and USD is the quote or Forex Trading Online
It means that one euro is exchanged for 1.25 US dollar. If the quote moves from EUR/USD 1.2500 to EUR/USD 1.2510, the euro is getting stronger and the dollar weaker. On the other hand if the EUR/USD quote moves from 1.2500 to 1.2490 the euro is getting weaker while the dollar is getting stronger.
Cross Rate is an exchange between two currencies that does not include official currency of a particular country which the exchange is taking place.
For example a transaction of GBP/JPY is taking place in the US. Then GBP/JPY is considered as cross rate for United States.
2 comments:
Selamat malam sob,,berkunjung nih...SPECIAL.
I just saw an ad for forex software called the instant Forex profit System. Has anyone tried it and knows how it works? I don't want to buy something that doesn't work.
Moving Averages Forex
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