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Thursday, April 30, 2009

Ciphering the Forex Quotes

Decided to invest in the stock market and confused about the forex quotes. It really seems difficult to understand the forex quotes at first step but a foreign exchange quote is not as difficult as it appears to be. It’s mandatory to understand the forex quotes before you are going to make your first investment in the currency trading. To conquer the currency trading there are two important things to remember about the forex quotes:

• The first currency listed first is the base currency and

• The value of the base currency is always 1.

While trading forex, two-sided quotes come across, which consists of a bid and an Ask

Bid: Bid is the price at which one can sell the base currency

Ask: Ask is the price at which one can buy the base currency and at the same time selling the counter currency.

Foreign Exchange Trading Quotes Tips

• US dollar is considered as the 'base' currency for quotes. It includes USD/JPY, USD/CHF and USD/CAD in the majors.

• Combination of two currencies involved in trade is known as “cross”. USD/JPY means that the forex quote is valid for someone who wants to use United States Dollars to buy Japanese Yen.

• Quotes are generally expressed as a unit of $1 USD per the second currency quoted in pair. A quote of USD/JPY 120.01 means that one U.S. dollar is equal to 120.01 Japanese yen.

• When a currency quote goes up, it means that dollar has appreciated in value and the other currency has gone down.

• If the USD/JPY quote increases to 123.01, the dollar is stronger because it will now buy more Yen than before. British pound (GBP), the Australian dollar (AUD) and the Euro (EUR) are the three exceptions to the above mentioned rule. If a quote is GBP/USD 1.436 it means that one British pound equals 1.4366 U.S. dollars. In these three currency pairs, where the U.S. dollar is not the base rate, a rising quote means a weakening dollar, as it now takes more U.S. dollars to equal one pound, euro or Australian dollar.

• An important point to remember about the forex quotes is, if a currency quote goes higher it increases the value of the base currency and a lower quote means the base currency is moving down.

About Author

Forex is the largest market place of Currency trading. While currency trading in Forex Market or dwelling over currency market, one should mull over the present scenario and future prospects of the country, currency of which he is trading.

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