Forex trading Intro: Currencies

in #forex2 months ago

rectangle shape on chart.jpg

Major Currencies
G10 currencies:
US Dollar (USD)
British Pound (GBP)
Swiss Franc (CHF)
Japanese Yen (JPY)
Canadian Dollar (CAD)
Australian Dollar (AUD)
New Zealand Dollar (NZD)

Swedish Krona (SEK)
Norwegian Krona (NOK)

Cross Pairs and Exotics
A cross-currency is a currency that doesn't include the U.S Dollar.

For example, EUR / CHF, EUR / JPY, GBP / JPY less liquid than majors and more volatile.

Usually have higher transactional costs than major.

How currencies are quoted?
How to read a currency pair.
All currencies are quoted in pairs consisting of the base currencies and counter currency.

First example:
EUR/ USD = 1.2500
Euro = base currency
U.S Dollar = counter currency
1 Euro buys 1.2500 U.S Dollar
It takes 1.25 U.S Dollar to buy 1 Euro

How to interpret exchange rate movements
A rise in an exchange rate means that the base currency becomes stronger (appreciated) on the counter currency became weaker (depreciated).

EURUSD rises from 1.25 to 1.30
Euro now buy more U.S Dollar (1.30)
than previously (1.25) ie Euro appreciated (OR) Dollar depreciated (OR BOTH)

It takes more US dollar to buy 1 Euro ie Euro appreciated (OR) Dollar appreciated (OR BOTH).


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