Trading Forex for a Living

Typically, the new investors in the foreign exchange market are confused about currency price quotes. In this section, we will take a look at the currency quote to see how they work in currency trading.

Read quotes

When you see the currency quotes, you will find that all currency quotes are in pairs – for example, USD / JPY, CAD / JPY. This is because when you buy a currency, you are selling a different. A sample of foreign exchange quotations in U.S. dollars (USD), Japanese Yen (JPY) looks like this:

USD / JPY = 101.30

This is the standard format for the currency pair. In this example, the left side of the slash of the currency (USD) is known as the base currency, the currency in the right (JPY) called the offer or counter currency. Remember, this is very important. The base currency (in this case, the dollar) is always equal to 1 unit (in this case, the U.S. $ 1), and the quoted currency is the equivalent in other currencies (yen).

If you want to buy $ 1, you will have to pay 101.30 yen. Or, if you want to sell for $ 1, you will receive 101.30 yen. These exchange rates are simple way to tell you, you will pay how much / receive, if you buy / sell “base” currency.

When you buy the base currency you are entering a long position. If you sell the base currency denominated in the currency to buy, you are entering a short-term position. So, once again, the USD / JPY example, if you buy the dollar, you want a long, if you are selling dollars, you will be short.

Bid and offer

To buy shares in the stock market trading currency forex quotes a bid and ask price. Always in the base currency of the relationship between the bid price and sell quotes.

Sales base currency, bid price the dealer is willing to go out and buy the base currency. Simply put, you will receive, if you sell price. When did you buy the base currency and selling price is the price of the dealer is willing to sell the base currency denominated currency exchange rates. Simply put, when you want to buy the base currency and selling price is the price you must pay.

Cross currency

The purchase of one currency not in the U.S. dollar currency is called cross currency quotes. Common cross currency pair EUR / CHF, EUR / GBP, EUR / JPY. Although the choice of the increase in cross-currency, cross currency on the foreign exchange market investors are not popular, because the U.S. currency on a part.

Pips and Spread

The difference between the bid and ask price of the foreign exchange quotations are usually referred to as a Spread. Pips, or points, used to refer to the incremental changes in foreign exchange quotations – change from 1.2000 to 1.2001, equal to a point is the common name. Although these currency movements may seem small, in the foreign exchange market, due to leverage small changes can lead to big profits or losses.

With the major currencies EUR / USD, USD / CAD, GBP / USD, one pip is equal to 0.0001. However, if you take a look at the USD / JPY quote, you will find an idea will be 0.01 to two decimal places. Therefore, under normal circumstances, a pip represents quoted in the last decimal place.

Direct currency quote and indirect currency quote

You can give a currency quote in two ways, either directly or indirectly. A direct monetary offer just a foreign currency is the base currency of the foreign exchange quotations, indirect quotations domestic currency is the base currency of the currency pair. For example, if you are in Canada, the Canadian dollar is the domestic currency, in the form of direct speech variable amount of local currency for a fixed amount of foreign currency.

Lots

Most stock transactions facilitate trading, currency trading in a lot of – $ 100,000, is a typical standard. Also referred to as small a lot of small batch size of $ 10,000. This may seem a lot, but because of the currency can only move in smaller increments, at the same time, only a few points, a greater amount of money is necessary to produce any substantial profit or loss.