Stacks of coins with the word FOREX isolated on white background

Trading currencies in the Forex is done through a currency pair . This currency pair, we can say that is the object that can be bought or sold . For example, EUR / USD – buying the pair results in the purchase of the base currency ( EUR – euro ) and the sale in the amount of the quote currency ( USD – US dollar ) .

Thus, stay  best to understand the following:

The exchange rate is the price of the currency against another currency.

It is the responsibility of the market establish the exchange rate.

The exchange rate is constantly quoted as a pair of currencies, through the use of an abbreviation ISO ( International Standards Organization ) . The first currency is called the base currency and the second is the quote currency or currency quotation . For example , EUR / USD corresponds to the exchange rate of euros for dollars . The first is the base currency and the second is the quote currency.

The exchange rate of that currency pair that determines how many dollars do  have to pay for every euro. Simply put, an exchange rate determines when it has to pay in quote currency per one unit of the base currency in case of sale , as it acquired in quote currency when selling a unit of currency basis.

The Bid (buyer’s price) and Ask (seller’s price) are presented as the constitution of the price of an exchange. The Ask is the price the buyer has to pay in quote currency to buy a base currency. The Bid is the amount of the quote currency that the seller will get.

The SPREAD is nothing more than the difference between the sale and purchase – the Bid and Ask.

When a large amount of money is traded, as $ 1 million or more the Spread is 5 PIPs { or base point – is the minimum fluctuation in value ( positive or negative) for a currency in the foreign exchange market }.

But, when will be negotiated small amounts, the Spread may be higher. Example, when it is negotiated less than 100 thousand dollars, normally the Spread can be 50 to 200 PIPs.


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