Forex Trading: Learn how to Read A Forex Quote
Forex is an abbreviated name for “foreign exchange.” The Forex market is a non-stop cash market where the currencies of nations are bought and sold, typically by way of brokers. For instance, you buy Euros, paying with U.S. Dollars, or you sell Euros for Japanese Yen.
The value of your Forex investment increases or decreases due to changes in the currency exchange rate or Forex rate. These shifts frequently result from economic and political factors, like the price of oil or political unrest. To better understand how the exchange rate can affect the value of your Forex investment, this article demonstrates to you how to read a Forex quote.
Forex quotes are always expressed in pairs. In the following example, your “pair” of currencies are the U.S. Dollar (USD) and the Euro (EUR). The Forex quote, USD/EUR = 265.50, means that one U.S. dollar is equivalent to 265.50 Euros. The currency to the left of the / (USD in this case) is referred to as base currency and its value is always 1. The currency to the right of the / (EUR in this case) is known as the counter currency. In this example, 1 USD can buy 265.50 EUR, because it is the stronger of the 2 currencies.
Since the U.S. dollar is regarded as the central currency of the Forex market, it is always treated as the base currency in any Forex quote where it is one of the pairs. Incidentally, the U.S. Dollar is associated with nearly 90% of all Foreign exchange transactions.
In this example, your “pair” of currencies are the Japanese Yen (JPY) and the Euro (EUR). The Forex quote, JPY/EUR= 175.10, shows that 1 Japanese Yen is equivalent to 175.10 Euros. The currency to the left of the / (JPY in this instance) is known as base currency and its value is one. The currency to the right of the / (EUR in this case) is referred to as the counter currency. In this example, one JPY can buy 175.10 EUR, since it is the stronger of the 2 currencies.
The goal of any Forex trading system is to make money from foreign currency movements. This requires adequate training in basic Forex principles, like performing a Technical Analysis, using Forex charts and Stop/Loss tools, and keeping up-to-date with economic and political events. In this way, Forex training never ends.
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