- Forex trading is the simultaneous buying of one currency and selling of another
- These two currencies make up what is known as a “currency pair”
- Currencies are always traded in pairs – each currency is represented by three letters
- The first two letters represent the country and the third letter identifies the currency
- Forex pairs are read in the opposite direction of mathematical proportions or ratios
For example: EUR/USD = 1.23700
- The currency to the left of the slash (“/”) is called the base currency (in this example, the Euro) and the currency on the right is called the quote currency (in this example, the U.S Dollar)
- This notation means that 1 unit of the base currency (that is, 1 Euro) is equal to 1.23700 U.S Dollars
- You have to pay 1.23700 U.S Dollars to buy 1 Euro
- If selling, the foreign currency exchange rate specifies how much units of the quote currency you get for selling one unit of the base currency
- A trader would open a buy position if they believe that the value of that specific base currency would increase.
- A trader would open a sell position if they believe that the value of that specific base currency would decrease.
- The spot FX market is unique among the world financial markets in that it’s open 24 hours a day, 5 days a week. See the below tables for GMT and EST trading times:
