Throughout the fx market transaction, an investor makes a purchase and simultaneous sale of two currencies.
These two currencies make up the currency pair. Here is an example of an exchange rate of the dollar against the yen:
USDJPY = 89.72
The currency on the left (3 letters) is called the base currency (in this example, the US dollar) and the currency on the right (3 letters) is known as its "counterpart" or "quoted currency" ( in this example, the Japanese yen). This means that 1 unit of the base currency (ie, one dollar) worth 89.72 Japanese yen. If you. Want to buy, the exchange rate specifies how many units of the currency counterparty you. Must pay to buy one unit of the base currency.
Given the example above, you. You must pay 89.72 Japanese yen to buy one US dollar. Now if you. Want to sell, exchange rate specifies how many units of the currency counterparty you. You receive by selling one unit of the base currency. According to the example, you. Will receive 89.72 Japanese yen by selling one US dollar.
As is the case with stocks, the price of a currency includes a purchase price (in English, bid) and selling price (in English, ask).
The difference in price and the ask price bid is known in financial markets as the "spread". All this can be clearly seen with an example of a quote taken currency system forex trading.
In the previous window (yellow rectangular section), the purchase price is 88.45 yen, and the selling price is 88.48 yen. The purchase price is the price that the 'dealers' (agents) are willing to pay for the base currency (in units of currency counterparty) and users of our software can sell. Thus, if an operator wants to sell, sell dollars to 88.45 yen. On the other hand, the selling price is the price at which Dealers are willing to sell the base currency and the users of our system could buy (buying dollars to 88.45 yen). As the difference between 88.48 (ask price) and 88.45 (price bid) three (3) pips, it is said that the spread in the USDJPY at that time was also 3 pips.
Despite many currencies throughout the world, 85% of all daily transactions involve trading of a group called the major currency pairs (in English majors). Are currencies are the US dollar, Japanese yen, euro, British pound, Swiss franc, Canadian dollar and Australian dollar. The four pairs most traded currencies are US dollar / Japanese yen (USD / JPY), euro / US dollar (EUR / USD), British Pound / US Dollar (GBP / USD), and the Swiss American / franc dollar (USD / CHF). The US dollar / Canadian dollar (USD / CAD) and Australian / US dollar (AUD / USD) dollar also traded currency pairs too. For operators, the best business opportunities are those related to the most frequently traded currencies (and therefore most liquid); ie currencies "Main".
In the previous window, we see the exchange rate of various currency pairs, including the exchange rate euro-dollar, the British pound-dollar exchange rate and the dollar-franc Swiss exchange. All these currency quotes are of major currency pairs.
Taking the example of the euro forex quote (the first currency pair above), buy a euro cost 1.0099 US dollars and sell euro would result in us US $ 1.2893.
If you. For more examples of currency quotes in real time, subscribe to a free tour of our software forex trading, by clicking the appropriate link below. You. Can access real-time quotes forex and perform simulated in real time using different currency pairs operations.