Understanding Forex Currency Pairs

Currency pairs and forex trading

Forex trading, in some way, is similar to stock trading.

Stock traders seek gain by speculating on changing value of the instrument, such as share price of the company.

Forex traders seek profit by speculating on changing value of one currency relative to the other. For example, value of USD to EUR.

Forex trading expresses the true worth of one currency relative to the other. For example, if the EUR is valued against USD and the exchange rate is 1.13, this would mean that one EURO can buy 1.13 dollars.

Every currency on Forex has a three-letter ISO (International organization for standardization), such as GBP, USD, JPY, and more.

Currency pair is the process of picking two currencies against each other, where the value of a base currency is speculated to rise against the quoted currency. For example, if you pick EUR/USD as your currency pair for forex trading, then EUR is the base currency, and USD is the quoted currency. Any rise in value of EURO relative to the US dollars would be your gain.   

A successful trader at Forex must pay great attention to the news circulating the world, particularly the two countries. Forex trading needs a lot of regular studies, and even that might not be sufficient for achieving high profits. One must know that larger the trade value between two countries, more liquid will be the currency pair.

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