Currency pairs

One of the basic information you need to know on currency trading is Currency pairs, is that you have to compare one currency to anther, only in that way you will know if there is changes in the currency. For example if you hold 100 USD for one month it will be worth the same in the end of the month, but if you bay in 100 USD 70 Euro and sell the 70 Euro back after a month you can get back 104 USD or maybe 96 USD. This is a currency pair and on this base all the trading is built.

How to read the quote – it is simple and after one lesson you know all the method.

EUR/USD 1.42
This means 1 Euro is worth 1.42 USD or 100 EUR can bay 142 USD.
The first currency in the pair is call base currency and the second is counter currency.
The quote is an average of what the world market is willing to bay the currency.

After learning how to read the quote we need to know if to bay or sell. If you think the EUR will raise agents the USD you bay the pair – the leading currency, for example you think the EUR is going to rise you buy the currency in 1.42 that is the quote this time for 1000 USD, after one month if the quote is 1.44 you have succeeded in your speculation and the can profit – 1000* 0.02 = 20 USD.
In the other hand if you think the Dollar will raise you have to sell this pair, if the quote after one month will be 1.4 you buy back the currency and profit 1000*0.02 = 20 USD.

If you think the base currency will raise you bay, if you think the counter will raise you sell the currency.
The majors are the most traded pairs in the world with over 80% of the daily investments:
EUR/USD, USD/JPY, AUD/USD, GBP/USD, USD/CAD and USD/CHF.
You can notice that the USD is part of every pair, regular pairs are quoted 4 digits after the point – EUR/USD – 1.4237.

In this example we don’t places the leverage that brokers give you and multiply your profits.