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Monday, June 4, 2012

Forex currency pairs: the base currency

 of the major forex trading, which makes it different from other stock markets and commodities is that all currencies are traded in pairs. The euro and U.S. dollar are the two most highly traded currencies in the world, and this currency pair is always quoted as "EUR / USD" of the euro for the first mentioned. In this pair of currencies, the euro is called "base currency" and the dollar is called "cross currency". Some of the other most popular currencies are the Japanese yen and British pound, and these currency pairs are always mentioned as " USD / JPY "and" GBP / USD. " This is not random mating, but rather has always been the ease of calculation that the stronger currency is the base currency and the currency is the currency weaker cross




The base currency is always a value of one, so when you see a quote for the currency pair or look at a chart of prices the value shown is the number of units of the cross which is equal to one unit of base currency. When we see a pair of currencies like the USD / JPY with a value of 115.00, this is saying that a dollar is equivalent to 115 yen. Understanding the relationship between the base currency and the currency cross and learning to read the quote currency pair in this way is essential if you want to make money in the forex market. A good exercise that can help you better understand this relationship with pairs of currencies is to pick up your newspaper and turn to the financial section, where there will probably be a table all day aggiornati.La currency chart currency that is published in most most major newspapers will list all major world currencies vertically and horizontally, with a diagonal line of blank spaces in which each currency aligns with himself. When you look at this table is the exchange rate of the dollar in terms of dollars, but this is literally quoted as USD / EUR instead of the traditional couple used on almost all platforms forex trading EUR / USD. If you had an open trade on this currency pair and wanted to look at the newspaper to see if your position gained or lost value, given the exchange rate of the reverse could be very confusing voi.Quindi, if you have an estimate of "0, 7407 "for the USD / EUR, what you want to do is take 1 divided by 0.7407 so that you can reverse the currency pair and get the normal EUR / USD quote that would be 1.3500. What this example tells you is that this value of the exchange rate can be read as "one euro equals $ 1.35" or "one dollar equals to 0.74 euros." From this example it is easy to see why the currency, which historically has a higher value is always quoted as the base currency, because it makes the calculations much more semplice.Se this type of calculation seems to complicated for you, you can simply say that if you puts the number 1 instead numerator (top) and the exchange rate in the place the denominator (bottom), will reverse the currency pair. It 's very important to a forex trader to understand these basic relationships with currencies and exchange rates, and once you get some' practice and experience (even if it is only trading a demo account) will become second nature to perform simple calculations that affect your trading

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