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The current page related to Currency Trading is located on fx currency traders XM forex trading section. Before starting forex currency trading the most important thing for any trader to take in mind is learning how to read currency fx currency traders and extract the information needed with once glance.
This is needed in order to be consistent, efficient, effective and spontaneous when deriving currency movements and taking trading order decisions. The first thing that you will notice when you log on to the platform will most likely be the Market Watch Window which has a variety of currency pairs listed with constantly updating rates. You will see that within this window, for every currency pair there are two rates which are moving simultaneously up and down.
These are known as the bid and ask quotes. In this currency trading tutorial, we are going to examine only the Ask, or second quote, for each currency pair as we will review what the bid and ask is later on. First of fx currency traders, it is important to note that when engaging in forex currency trading, currencies are always quoted in pairs, that is, the value of a currency is always determined in relation to its value against another currency.
Therefore the quote that you can see here is how much of the Counter currency it takes to buy 1 of the Base currency in the pair. In this example the US dollar is the base currency and the Japanese Yen is the counter currency. They are all quoted against the US Dollar. There are forex currency trading pairs which can include two of these currencies and do not include the US Dollar. Currency pairs which do not involve the US Dollar are known as cross currencies.
It should be noted that there is no difference in the quoting convention however. As detailed above, this quote outlines how much fx currency traders the counter currency it takes to buy one unit of the base currency.
Therefore, in this quote fx currency traders know that it will cost 1. Now fx currency traders we have reviewed how to read a forex currency fx currency traders quote, the next step that is important to clarify is what an increase or decrease in a quote for a currency pair tells us about the value of the currencies in that particular pair.
Fx currency traders outlined in the previous section, currencies are quoted in pairs, i. A currency quote tells us how much of the counter currency in the pair it will cost to buy one of the base currency. Therefore, if the quote for a currency pair rises, then this means that it will now cost more of the counter currency to buy 1 of the base currency. This shows us that the base fx currency traders in the pair has risen in value, while the counter currency in the pair has declined in value.
On the other hand, if the quote for a currency trading pair goes down then this means that it now costs less of the counter currency to buy 1 fx currency traders the base currency. This shows us that the base currency in the pair has declined in value, while the counter currency in the pair has risen in value.
While this seems like a fairly straightforward notion, it is something that even relatively experienced traders sometimes confuse. A simple way of remembering this is simply to note that if the rate is increasing then this means that the base currency is strengthening, and therefore that the counter currency is weakening.
On the other hand, if the rate is decreasing then this means that the base fx currency traders is weakening, and therefore that the counter currency is strengthening. There are always two prices for a forex currency trading pair at any one time and these are known as the bid and the ask price. The bid price is the price that the market maker the entity on fx currency traders other side of your trade will buy, and therefore the price at which you, the client can sell.
The ask price is fx currency traders price at which a market maker will sell and therefore the price at which you, the client can buy. Market makers, such as those on the New York Stock Exchange, make their profit from the spread, i. Although this is changing with the advent of fx currency traders trading platforms, the concept of a bid and ask price is foreign to most, because traders are most familiar with the stock market where they have traditionally called their brokers whenever they wanted to place fx currency traders trade who then placed the trade on their behalf with the market maker.
When they call their broker they say they would like to buy x amount of xyz stock, the stock broker simply gives the client the ask price for that stock since the client has asked to buy. The stock market is in the process of going from indirect access where clients trade through a broker to fx currency traders to the market maker to a more direct access environment where online trading platforms allow them to trade directly with the market maker.
As the forex market for individual traders really started with the internet, the market did not have to go through the same transition. Because of this most forex trading platforms show both the fx currency traders and the ask price and make their money through the spread, charging clients zero commissions to trade. The difference between those prices is the spread.
Traditionally a 1 pip move in the currency trading market is the smallest move that a currency can make; another way of looking at this is that a 1 pip move in the market, is a move up or down by 1 of the number sitting the furthest to the right of the decimal point in the forex currency trading pair quote. As most forex currency pairs have 4 decimal places a 1 pip move in the market would be a move up or down by 1 of the number sitting in fx currency traders 4th decimal place spot in the quote.
In the JPY based currency pairs where there are two decimal points, a 1 pip move in the market would be a move up or down by 1 of the number sitting in the second decimal point spot.
With this in mind a move to If you noticed at the beginning of this section we noted that a 1 pip move in a currency pair has traditionally been the smallest move that a currency pair could make. We say this because electronic platforms have brought greater price transparency to the currency fx currency traders market and price competition has heated up and most trading fx currency traders have added an additional decimal place to their quotes.
This addition is known as fractional pip, now many of the currency pairs which have traditionally been 4 decimal places quoted out to 5 decimal places and the pairs which have traditionally been quoted out fx currency traders 2 decimal fx currency traders quoted out to 3 decimal places in currency trading pairs. This page is part fx currency traders archived content and may be outdated.
Forex Currency Trading First of all, it is important to note that when engaging in forex currency trading, currencies are always quoted in pairs, that is, the value of a currency is always determined in relation to its value against another currency.
Understanding Forex Currency Trading Rate Movements Now that we have reviewed how to read a forex currency fx currency traders quote, the next step that is important to clarify is what an increase or decrease in a quote for a currency pair tells us about the value of the currencies in that particular pair. Fx currency traders Explanation of Pips and Fractional Pips Traditionally a 1 pip move fx currency traders the currency trading market is the smallest move that a currency can make; another way of looking at this is that a 1 pip move in the market, is a move up or down by 1 of the number sitting the furthest to the right of the decimal point in the forex currency trading pair quote.