Sunday, March 24, 2013

The Mechanics of Forex Trading Pairs Revealed

Forex Trading In India How to Trade in Currencies
Forex Trading In India Fx Pairs
When someone says that he/she is trading currencies, what does it mean? It means that he/she is betting that one currency will become stronger in relation to another currency. A Forex trader may set up a trade that Australian dollar (AUD) will get stronger against Japanese yen (JPY) or Euro (EURO) will get stronger against US dollar (USD). The concept that one currency gets stronger against another is the basic fundamental of currency trading.

 A Forex trader places trades in currency exchange pairs also known as FX pairs. As all the traders buy and sell a currency against other currencies, therefore the prices of the currencies move up and down against each other. The prices of the currencies in Forex trading are reflected in the quote that you can see in your trading platform for that FX pair. For example, after studying the fundamental and economic conditions of the country, you think that the value of the US dollar is underpriced against the value of euro. You might have concluded this due to the geopolitical events or after a big run in the euro.

The difference in the relative value of the USD and EUR are measured and traded in the currency pair EUR/USD. Here EUR stands for euro and USD stands for U.S. dollar. The currency pair EUR/USD represents the value of the EUR relative to USD. At any time during trading hours in foreign exchange market, the value of euro will be worth lesser or greater amount in dollars based on trading conditions. If the value of one euro is found to be worth a certain amount of dollar during the Forex trading time, that value will be reflected in the quote of that currency pair.

 Suppose, the value of one euro is found to be worth $ 1.50 during the online trading hours, the quote for the currency pair would be EUR/USD 1.50. In another example, consider the currency pair AUD/CHF (Australian dollar/Swiss franc); if one Australian dollar (AUD) bought 0.8760 Swiss francs, then the quote for this particular Forex trading pair would be AUD/CHF 0.8760. If Australian dollar becomes stronger against Swiss franc, the quote for this currency pair will move up.

If at any time during the Forex trading hours, AUD buys 0.9176 CHF, the quote would be AUD/CHF 0.9176. As the Australian dollar gets stronger and the exchange rates changes between the Australian dollar (AUD) and the Swiss franc (CHF), the one Australian dollar buys more Swiss francs. If the currency trading market conditions change and the market determines that one Australian dollar (AUD) should buy 0.9200 CHFs, then the new quote that the Forex traders all over the world will see for the currency pair AUD/CHF is changing from 0.9176 to it new value 0.9200.

Free Learn how to trade in Currencies forex trading in India
Free - Learn How to Trade Currencies in India

4 comments:

  1. Nice posting, thanks for sharing with us. Your blog is great and helped me feel better knowing about the Online currency trading in india. Thanks again!

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  2. A lot of traders of India invest in Foreign exchange, and they are earning good profit as well. Take advise from TheEquicom Research and become successful, try for free.
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  3. Thank you for clearing the concept of forex trading pairs. Among the four major currency pairs, EUR-USD is the most popular and has the highest volume of transactions.

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    Partner Relations Department
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