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Part 1

Discussion in 'Beginners Bootcamp' started by SwingTrader1, Jun 20, 2010.

  1. SwingTrader1

    SwingTrader1 Recruit

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    Welcome to part 1 currency pairs.

    In foreign exchange currency pairs are listed in a dominant and subordinate form. I will use the EUR/USD as an example but you can apply this to any currency pair.

    In the EUR/USD the dominant currency is the euro the subordinate is the dollar. All currency pairs are listed this way.

    What you need to know as a forex trader are 3 things about a particular currency pair you want to trade.

    1) Buying/selling, when you buy a currency pair you are buying the dominant currency (euro) When you sell a currency pair you are selling the dominant currency.

    2) The quote, thats the amount of money it takes in one currency to equal another currency. The quote is always from the subordinate currency.
    Lets use the EUR/USD as an example; EUR/USD is trading at 1.2378 what that means is that it will take 1.2378 US Dollars to equal 1 Euro. Works the same for all currency pairs.

    3) When you buy a currency pair what you are doing is buying the euro and simultaneously selling the dollar. When you sell a currency pair what you are doing is selling the euro and simultaneously buying the dollar. This is important to know when calculating rollover, which I will cover later.
     

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