What Do Automatic Forex Trading Currency Pairings Mean?
When talking to people who have never tried automatic forex trading before, even those involved in futures, stocks, and bonds , it always reminds me that sometimes even the most basic foundational elements of this global powerhouse of a market have to be explained . So let’s jump right into what the pairings mean, what the main pairings are, and what the cross pairings are .
What exactly is a currency pair ? First we’ll look at the Eur/Usd which has against the Euro, the US dollar as the bas currency within this pair. What is the meaning of the pari when I have a price quote that is 1.3200 on the Eur/Usd? The easiest way to remember the answer is this : take your currency pair base , which is the US dollar in this case , look at the price quote of 1.3200 , then you say, " to buy 1 Euro it will take me 1.3200 US dollars ." The price quote means exactly that . Perhaps a few months later you check out the price quote and now it is 1.4000 this tells you that the US Dollar is now weaker when compared to the Euro because it now takes 1.4000 US Dollars to buy 1 Euro . On the other hand, if you find the price quote is 1.2500 down the road, then the US dollar is getting stronger because you’ll only need 1.2400 US dollars to purchae a Euro.
Automatic forex trading can become even more challenging when for the Usd/Jpy pair you see a price quote that is 100.50. Using the above method , simply take the base currency of Jpy take a look at the price quote that is 100.50 and that is how many Jpy it will take to buy 1 US Dollar . That is fairly simple, isn’t it ? In the future you shouldn’t have difficulty understanding a pair and its price quote when you see a quote window or chart screen .
Now that price quotes can be read, what are the main pairs and cross pairs ? The main pairs are the world’s strongest economies agasint the US dollar . A few of these pairs are Eur/Usd, Gbp/Usd, Aud/Usd, Usd/Cad, Usd/Jpy, and Nzd/Usd . The US dollar is not involved in a cross pair such as Eur/Jpy, Gbp/Jpy or Eur/Gbp to name a few of the more popular ones .
Hopefully you’ll be helped by this article if you’ve been feeling intimidated the automatic forex trading landscape in the past . You may need a bit of time to get used to this with all of the different currency pairs, time zones, and economies . Once you begin realizing how the pieces all go together it’s really not that bad - and many of us think it’s actually quite fun !
