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money Understanding Forex Currency Pairs- TopAsiaFX
by topasiafx
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( on Feb 4, 2019 12:14:46 AM

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Before you register for an account, it is important to know the basics of forex trading from currency pairs and so on.
Currency pairs compare the value of two currencies through the numerator/denominator relationship, with the base currency above and the quote currency at the bottom. In the EUR / USD currency pair, the most popular forex trading instrument in the world, EUR is the base currency and USD is the quote currency.

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The EUR / USD quote shows a ratio that is roughly the same as what you will pay if you visit Paris and need to exchange dollars with euros. USD is equal to $ 1.00 in this calculation, so the quote "EUR / USD 1.23000" means the euro is trading 23% higher than the US dollar.

Each ratio is quoted in two to five decimals and also comes in a reverse version, which creates a new currency pair that moves in the opposite direction. To follow our example, EUR / USD measures the value of the euro against the US dollar while the USD / EUR measures the value of the US dollar against the euro. Therefore:

If EUR / USD = 1.25000 / 1.00 = 1.25000

Then USD / EUR will = 1.00 / 1.25000 = 0.80000

Historically, traders in various countries took long and short positions with their local currencies at the bottom (quote currency), but that changed after the popularity of forex skyrocketed earlier this decade. Now, most participants throughout the world trade currency pairs with the highest volume. The most popular versions also tend to bring narrower bid / ask spreads, thereby reducing trade costs.

Forex traders make money on long EUR / USD positions when the ratio is higher and loses money when it is lower. Conversely, traders make money with short EUR / USD positions when the ratio falls and loses money when rallying. While regulated forex brokers can offer dozens of currency pairs, four major pairs attract huge trading interest:

EUR / USD - euro and US dollar
USD / JPY - US dollar and Japanese yen
GBP / USD - British pound sterling and US dollar
USD / CHF - US dollar and Swiss franc

Take your time when looking for which currency pair you want.

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