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Chapter 1, Part II. What is a trading object in the FOREX market? Page 2

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 14, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Commander in Pips: If, for example, you see that EU economy does not show growth and looks like it is bad and getting worse, but Japan’s economy is behaving well and is improving- it seems logical to buy Yen for Euros. In fact, all positive and negative national issues, not only economic but also a political, find their way into the currency value. Furthermore, not only those that have happened already, but those that were announced or are expected to happen in the future by market participants.
    Pipruit: Sounds like buying equities. But instead of different companies these are different national economies, and instead of stocks these are currencies. It seems that when I’m buying one or another currency, I’m buying a share in the national economy that this currency belongs to.​

    Commander in Pips: “Buying a share in the national economy that this currency belongs to.” Nice conclusion, son, even I couldn’t say it better. Absolutely right!

    Pipruit: I think I’m starting to understand the concept. The last question…When we choose equity to purchase, we have confidence or assume, at least, that this equity and their company will perform better than their rivals. It’s absolutely clear. But what is about currencies?​

    Commander in Pips: Absolutely the same. For example, when you’re buying Yen for US dollars, you expect that the Japanese economy will outperform US economy during the time while you intend to hold Yen position. If you are right, then you will exchange Yen for bucks after some time and make some profit, because yen rate will become higher and you will get more US dollars for the same amount of Yen during reverse exchange – when you sell the Yen for dollars. Generally speaking, the exchange rate of one currency to another reflects the relative power, condition and perspectives of that country’s economy, compared to other one.
     
    #1 Sive Morten, Dec 14, 2013
    Lasted edited by : Jan 31, 2016
    Saleh1980, jokondo, notabot and 12 others like this.
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