The Basics of Forex Trading

The Basics of Forex Trading. Gordon Scott has been an active investor and technical analyst of securities, futures, forex, and binary options strategy penny stocks for binary options 20+ years. He is a member of the Investopedia Financial Review Board and the co-author of Investing to Win. Gordon is a Chartered Market Technician (CMT). He is also a member of CMT Association. “Forex” stands for “foreign exchange”and refers to the buying or selling of one currency in exchange for another.

It’s the most heavily traded market in the world because people, businesses, and countries all participate in it, and it’s an easy market to get into without much capital. When you go on a trip and convert your U.S. dollars for euros, you’re participating in the global foreign exchange market. At any time, the demand for a certain currency will push it either up or down in value relative to other currencies. Here are some basics about the currency market so you can take the next step and start forex trading.

Key Takeaways. The foreign exchange is the market where currency pairs are traded. Currencies always trade in pairs, such as the EUR/USD, and traders make positions based on their assumption of price changes. Currency price changes are measured in pips, which traders use to establish trade positions. Currency Pairs Primer. Before you enter your first trade, it's important to learn about currency pairs and what they signify. In the forex market, currencies always trade in pairs .

When you exchange U.S. dollars for euros, there are two currencies involved, so the exchange always shows the value of one currency relative to the other. The EUR/USD price, for example, binary options broker lets you know how many U.S. dollars (USD) it takes to buy one euro (EUR). The forex market uses symbols to designate specific currency pairs. The euro is symbolized by EUR, the U.S. dollar is USD, so the euro/U.S. dollar pair is shown as EUR/USD.

Other commonly traded currency symbols include AUD (Australian dollar), GBP (British pound), CHF (Swiss franc), CAD (Canadian dollar), NZD (New Zealand dollar), binary options broker and JPY (Japanese yen). Each forex pair will have a market price associated with it. The price refers to how much of the second currency it takes to buy one unit of the first currency. If the price of the EUR/USD currency pair is 1.3635, this means it costs 1.3635 U.S. dollars to buy one euro.

To find out how many euros it costs to buy one U.S. dollar, binary options strategy flip the pair to USD/EUR: divide 1 by 1.3635 (or whatever the current rate is). In this instance, the result is 0.7334. It costs 0.7334 euros to buy one USD based on the current market price. The price of the currency pair constantly fluctuates, as transactions occur around the globe, 24 hours a day during the week. Market Pricing: A Quick Overview.