Vertex Emarketing | Online Marketing Strategies

Currency Trading” is just another phrase used for “Forex Trading”.Now that you know what Forex is and how you can start trading in it, it’s time to delve into the inner workings of the whole thing; by that, we mean what you’ll actually be trading with, which are currency pairs.

We’ll be starting with the three most commonly traded currencies, which are the US Dollar, the British Pound, and the Euro. Now, when it comes to notations, banks and brokers use an ISO code to refer to each currency for the sake of simplicity. ‘What in tarnation is an ISO code?’ you might be wondering. Well, an ISO code is simply an abbreviation of the currencies’ name. An example of that would be referring to the US Dollar as USD, or the British pound as GBP, or the Euro as EUR.

ISO codes were made to be easy to remember and easily distinguishable from each other. However, there are always exceptions to the rule. For example, the Swiss Franc is ambiguously assigned the ISO code that is CHF.

Currency Pairs

In Forex trading, currencies are quoted in pairs. This is basically due to the fact that the only way to put a value on a currency is by comparing it to another.

Now, if you compare a US Dollar to another US Dollar, you’ll find that the ratio is equal to 1. That means that 1 US Dollar is worth 1 US Dollar. If you were to ask how much a US Dollar is work in British pounds, you’d find that the answer is £0.77 (As of the time of writing). This is why we group currencies in pairs.

Well, what does a currency pair in Forex look like? It’s basically something along the lines of:

EUR/USD = 1.1453One EURO is currently worth 1.1453 in US Dollars.

When reading a currency pair, the first currency is known as the base currency and the second is called the quote currency. To give an example, in the pair EUR/USD, EUR is the base currency, and USD is the quote currency. The given rate basically refers to the value of one unit of the base currency in comparison to the quote currency. Let’s take a look at an example to further explain the idea.

Let’s use the same example as before:

EUR/USD = 1.1453

Here, EUR is the base currency while USD is the quote currency. €1 is $1.1453.

Long/Short – Buy/Sell – Bullish/Bearish

Here’s what you should know so far when you see the currency pair EUR/USD:
EUR is the base currency.
What this pair refers to is the exchange rate of 1 EUR to USD at one specific moment. These exchange rates keep changing due to various reasons. (Technically supply and demand)
This is a line chart of EUR USD exchange rate from Nov 2017 to July 2018.

EURUSD Forex Chart

When this rate goes up (an uptrend) it’s called a bullish market. The opposite (a downtrend) is called a bearish market.

Simply put, when you’re trading a currency pair you are doing one of two things:

Long or Buy – Betting this rate will go up.

What this implies is that when you think that the value of the EUR is going to go up in relation to the value of the USD, then you would buy the currency pair. You would also buy the pair even if you think the USD is going to decrease in value in relation to the GBP.

On the flip side, if you estimate that the EUR is going to lose some of its value in relation to the USD, then you’re better off selling the currency pair. You’d also sell the pair if you thought that the USD is going to go up compared to the EUR.

Although it seems like betting, there is a lot going on in the background making you actually participating in the forex market. This is how it is done.
When you open a long position it means that you’re buying the base currency and selling the quote currency.
When you open a short position it means that you’re selling the base currency and buying the quote currency.
With that said, in the end, you are making money by predicting the direction of these currency exchange rates.
I’m not a financial expert, how will I able to do that?
We will get to that in the later part of this beginners’ guide to forex trading.

vertexemarketing