Currencies are traded in dollar amounts called "lots". One lot is equal to $1,000, which controls $100,000 in currency. This is what is known as the "margin". You can control $100,000 worth of currency for only 1,000 dollars. This is what is called "High Leverage".
Currencies are always traded in pairs in the FOREX. The pairs have a unique notation that expresses what currencies are being traded. The symbol for a currency pair will always be in the form ABC/DEF. ABC/DEF is not a real currency pair, it is an example of a symbol for a currency pair. In this example ABC is the symbol for one countries currency and DEF is the symbol for another countries currency.
Here are some of the common symbols used in the Forex:
USD - The US Dollar
EUR - The currency of the European Union "EURO"
GBP - The British Pound
JPN - The Japanese Yen
CHF - The Swiss Franc
AUD - The Australian Dollar
CAD - The Canadian Dollar
There are symbols for other currencies as well, but these are the most commonly traded ones.
A currency can never be traded by itself. So you can not ever trade a EUR by itself. You always need to compare one currency with another currency to make a trade possible.
Some of the common PAIRS are:
EUR/USD Euro / US Dollar
"Euro"
USD/JPY US Dollar / Japanese Yen
"Dollar Yen"
GBP/USD British Pound / US Dollar
"Cable"
USD/CAD US Dollar / Canadian Dollar
"Dollar Canada"
AUD/USD Australian Dollar/US Dollar
"Aussie Dollar"
USD/CHF US Dollar / Swiss Franc
"Swissy"
EUR/JPY Euro / Japanese Yen
"Euro Yen"
The listed currency pairs above look like a fraction. The numerator (top of the fraction or "left" of the / however you want to SEE it) is called the base currency. The denominator (bottom of the fraction or "right" of the /however you want to SEE it) is called the counter currency. When you place an order to buy the EUR/USD, for instance, you are actually buying the EUR and selling the USD. If you were to sell the pair, you would be selling the EUR and buying the USD. So if you buy or sell a currency PAIR, you are buying/selling the base currency. You are always doing the opposite of what you did with to base currency with the counter currency.
If this seems confusing then you're in luck. You can always get by with just thinking of the entire pair as one item. Then you are just buying or selling that one item. Thinking like this will still enable you to place trades. You only need to be aware of the base/counter concept for Fundamental Analysis issues.
So why is it important to know about the base/counter currency? The base/counter currency concept illustrates what is actually taking place in a Forex transaction. Some of you reading this, know that short-selling was restricted in the stock market *(Short-selling is where you sell a stock/currency/option/commodity first and then try to buy it back at a lower price later). But in the FOREX you are always buying one currency (base) and selling another (counter). If you sell the pair you are simply flipping which one you buy and which one you sell. The transaction is essentially the same. This allows you to short-sell with no restrictions.
You want to be able to short-sell with no restrictions so you can make money when the market drops as well as when it rises. The problem with traditional stock market trading is that the market has to go up for you to make money. With FOREX trading you can make money in all directions.
Omar Vargas; FOREX Trader and Freelance writer.
http://www.1-forex.com
There are some common mistakes I've seen traders make in... Read More
Forex trading online is a fast way to use your... Read More
Everyone trades a little differently. The trading method outlined below... Read More
To trade on the forex market, the largest financial market... Read More
In recent years, investors have witnessed increased number of investment... Read More
Keen on starting FOREX trading? Why would you not be?... Read More
Most new traders tend to focus just about all their... Read More
Which way will the forex market move? Do you just... Read More
Consider the following: As a trader you are in a... Read More
There are lot's of Forex signals providers out there. New... Read More
FEARING LOSSESThere is a huge difference between being risk averse... Read More
Most traders use a FOREX broker to handle their transactions.... Read More
An online forex broker is a firm that facilitates retail... Read More
What is Stocks Trading?Companies throughout the world issue new stock... Read More
During my first year as a local (independent trader) on... Read More
Momentum day trading can be extremely profitable when done correctly...Day... Read More
Indeed large multinational and individual banks and other major financial... Read More
Everybody hates to lose and unfortunately no one is blessed... Read More
You know the old joke:"How do you make a million... Read More
Have you noticed that when someone's trying to sell you... Read More
Below I will describe three basic principles that may come... Read More
Foreign exchange market, or better known as FOREX, is the... Read More
There is one very important factor that you should consider... Read More
A Forex broker is a broker dealing in foreign exchange,... Read More
If you ask me whether the market will have moved... Read More
The essence of the FX2u Forex strategy is that it... Read More
What is arbitrage? Arbitrage is the simultaneous buying and selling... Read More
When day trading the SP and Nasdaq futures, do you... Read More
Forex made easy is as simple as you would want... Read More
I read on a bulletin board a traders comment that... Read More
One can learn forex trading as easily as one would... Read More
IntroductionThe exchange rate refers to the value of the US... Read More
Money management determines how much to risk on each individual... Read More
Success in any profession can be broken down into a... Read More
Have you heard the wise saying that a trader who... Read More
RULE #1) ~ Cut your losers; let your winners ride.One... Read More
To make a profit, in the FOREX, a trader can... Read More
I remember the first time I started to trade online.... Read More
Are you thinking of entering the fast-paced world of day... Read More
If you want to be a successful trader, you must... Read More
Could it be possible that you are staring right into... Read More
You may be asking yourself "how does one begin to... Read More
The recent upheavals in the world financial markets were quelled... Read More
International commerce has rapidly increased as the internet has provided... Read More
The foreign exchange currency market is the largest market in... Read More
What is Forex Trading?Forex, or Foreign Exchange, is the simultaneous... Read More
There is an old saying that the market is driven... Read More
Foreign exchange market, or better known as FOREX, is the... Read More
Consider the following: As a trader you are in a... Read More
There is one aspect that is considered as one of... Read More
Forex made easy is as simple as you would want... Read More
The business world is a complex web of supply and... Read More
FOREX is the abbreviation for the Foreign Exchange market. FOREX... Read More
The essence of the FX2u Forex strategy is that it... Read More
"Is it important to be creative in your trading?"I'm not... Read More
There are many advantages to Trading FOREX as your main... Read More
An online forex broker is a firm that facilitates retail... Read More
I am reading a fantastic book on trading, first published... Read More
The base unit for the renminbi is the yuan, which... Read More
If you are reading this article you are probably one... Read More
Foreign exchange market is also known as Forex or FX... Read More
QUESTION: If the SP futures fall through support and go... Read More
A broker is any person or firm that charges a... Read More
To trade on the forex market, the largest financial market... Read More
I read on a bulletin board a traders comment that... Read More
Forex option brokers can generally be divided into two separate... Read More
Currency Trading |