Understanding Forex Quotes

Reading a foreign exchange quote may seem a bit confusing at first. However, it's really quite simple if you remember two things:
1) The first currency listed first is the base currency and
2) the value of the base currency is always 1.

The US dollar is the centerpiece of the Forex market and is normally considered the 'base' currency for quotes. In the "Majors", this includes USD/JPY, USD/CHF and USD/CAD.

For these currencies and many others, quotes are expressed as a unit of $1 USD per the second currency quoted in the pair. For example, a quote of USD/JPY 110.01 means that one U.S. dollar is equal to 110.01 Japanese yen.

When the U.S. dollar is the base unit and a currency quote goes up, it means the dollar has appreciated in value and the other currency has weakened. If the USD/JPY quote we previously mentioned increases to 113.01, the dollar is stronger because it will now buy more yen than before.

The three exceptions to this rule are the British pound (GBP), the Australian dollar (AUD) and the Euro (EUR). In these cases, you might see a quote such as GBP/USD 1.7366, meaning that one British pound equals 1.7366 U.S. dollars.

In these three currency pairs, where the U.S. dollar is not the base rate, a rising quote means a weakening dollar, as it now takes more U.S. dollars to equal one pound, euro or Australian dollar.

In other words, if a currency quote goes higher, that increases the value of the base currency. A lower quote means the base currency is weakening.

Currency pairs that do not involve the U.S. dollar are called cross currencies, but the premise is the same. For example, a quote of EUR/JPY 127.95 signifies that one Euro is equal to 127.95 Japanese yen.

When trading forex you will often see a two-sided quote, consisting of a 'bid' and 'offer'. The 'bid' is the price at which you can sell the base currency (at the same time buying the counter currency). The 'ask' is the price at which you can buy the base currency (at the same time selling the counter currency).

Why Trade Forex?

The markets are open 24 hours a day
Round the clock trading gives the trader the opportunity to trade within any time zone around the world. The currency market is the largest and most lucrative market available and its trading hours extend from Friday evening 10h00 until Monday evening 22h00. In between these periods the markets are open for trading 24 hours per day.

The currency market is a 24-hour market. As a trader, this allows you to react to favorable/unfavorable events by trading immediately. It also gives traders the added flexibility of determining their trading day. You can live and work anywhere in the world. You can be independent from routine and not answer to anybody.

Largest and most lucrative market in the world
If you add all the volume on all the stock exchanges in the world, it would still not get close to the volume on the Forex markets. Volume ensures that a trader will never be stuck with a position – if you want to buy there will be sellers and if you want to sell there will be buyers.

In excess of 1,5 trillion USD gets traded on a daily basis, this is more than all the other speculative markets put together and with more than 60 currency pairs available for trading daily it has a huge potential for day traders.

Unequalled volume and movement in the world
Together with volume a day trader needs volatility – price movement. The movement in the Forex market together with the gearing factor makes this one of the most lucrative markets in the world.

More currency than stock market shares are traded on a daily basis. There will always be buyers and sellers with the resultant opportunities to trade. You can also trade when the markets are moving upwards or downwards.

Offshore investment earning US Dollars
Most investors seek offshore investment opportunities. Currency trading not only offers you this opportunity but enables you to grow your investment by substituting your investment with profit earned from trading.

Limited Capital required to start and operate this business
Unlike most other businesses Currency trading does not need extra money to grow your investment or substitute your business with cash to expand your new plans. You simply grow your investment or new plans by locking in profits from your trading account.

Limited infrastructure required
You only need your computer, set–up with the appropriate software and the necessary training to conduct your business. No offices and other costly infrastructure stretching your cash flow to the extreme is required.

Little or no staff required
In this business it is predominantly you and your computer and you have no staff, no labor problems, no cash flow planning, no salaries and wages, to be concerned about.

No stock
No business can operate without stock be it production or even stationery stock, this in itself is a huge expense to keep and protect and many hours are spent to control and check your stock... now you can conduct a business without these expenses.

No theft and shrinkage
No losses to be concerned about and investing huge amounts of money to protect yourself against potential losses from theft or shrinkage.

No opposition
Because of the volumes involved in this market you will always have a buyer when you want to sell your currency.

Almost paperless business
All transactions are logged into your computer through the trading software. You can watch your trading bank account while locking in profits during your trade.

Free and user friendly software

Non-Simulated Demo trading account
You will see real movements in the market and be able to trade them without risking real money.