The most difficult for newcomers to forex to wrap their heads is how to read the quotes of currency pairs. After all, most of us are used to seeing one price for an item. For example, a piece of bread worth $ 2; a stock sells for $ 40.50 per share, etc. But in this case, we exchange one USD-currency for physical goods. Buying one currency with another can be a real headscratcher. However, this article will hopefully eliminate some of your confusion.
How currencies are traded
The currency traded in a currency pair. For example, a common currency pair is American Dollar and Japanese Yen is expressed as USD / JPY. The quote for this currency pair might look like this: USD / JPY 119.01 / 07. This shows the bid price of 119.01 (first number) and the asking price of 119.07. Then replace the last two digits of the first number with the number that appears after the slash.
The price of the offer tells you how many units of currency counter. Or the currency listed after the slash that you can get for one unit of the base currency. In this example, you can get 119.01 Japanese yen for one US dollar. The price requested tells you what unit of currency counter you need to get one unit of the base currency. In this case, market makers are willing to sell one US dollar for 119.07 Japanese yen.
If you have noticed, you must have noticed that market makers buy dollars worth 119.01 yen. Then you will sell it for 119.07. This “advantage” (the difference between supply and demand) is called a spread. Spreads are measured in pips. One pip is equal to each decimal point difference between the bid and ask, so in this case, the spread is four pips.
For another example, let’s look at the Euro-U.S. dollar pair (EUR / USD). First, note that the Euro is registered first. This means that it, not the US dollar, is the base currency. Normally, the US dollar is the base currency, but not when compared to the “Queen currency” of the United Kingdom pound (GBP), the Australian dollar (AUD), or the New Zealand dollar (NZD), or when compared to the Euro (EUR).
Ordinary Currency Pair
There are four “major” currency pairs: EUR / USD, USD / JPY, GBP / USD, and USD / CHF (GCHF = Swiss franc); and three “commodity” pairs: USD / CAD, AUD / USD, and NZD / USD (CAD = Canadian dollar). That’s a total of eight currencies, which are far easier to follow than more than 15,000 shares actively traded on the U.S. stock market.
You might also notice that currency pairs are mainly involved in US dollars. Each currency pair that does not use USD either as the base currency or the opponent’s currency is considered a cross currency. Examples might be EUR / JPY or GBP / CHF. It is important to note that not all forex brokers deal with all currency pairs. So if you have a particular strategy, it is important to make sure your broker makes a transaction in the pair you want to trade.
After you know how the pair works, and component components that are related to pairs. Then it’s time for you to look for a trading system that will help you analyze the market. On our site, a system that has been proven accurate, simple, with consistent profit, namely forex signal 30. This forex trading system uses indicators that do not repaint. So for beginner traders, this system can be easily followed. Of course to make profit cakes and green pips. This forex signal 30 trading system has been published since 2009 and has been used by thousands of forex traders throughout the world. It’s time for you to join the community of 30 signal forex users. And let’s hunt pips.