The (Foreign Exchange) Forex Trading Market Explained.

How Forex Quotes Can Influence your Trading Tactics

The price of currency is determined by a number of factors. The most influential factors are political conditions, inflation, and interest rates. Governments often try to control the price of their currency by flooding the market to lower the price or buying extensively to raise the price.

However, the foreign exchange market is the largest in the world, making it difficult to manipulate over the long run. A government may be able to control the price of their currency for a short length of time, but inevitably market forces will prevail. This certainty makes the forex one of the fairest investment options available.

Understanding quotes is an essential component of trading effectively on the forex, but can be somewhat confusing for new traders. Each quote contains a trading symbol, which is a three letter code given to each country’s currency. The most common currencies are the United States dollar, USD, the Japanese yen, JPY, the European Euro, EUR, the United Kingdom pound, GBP, the Australian dollar, AUD, the Swiss franc, CHF, and the Canadian dollar, CAD.

Forex quotes are demonstrated using pairs of currency symbols. There are always two currencies quoted because when you make trade in the foreign exchange market, you are always buying one currency while selling another. The most common pairs of currency are referred to as majors and are GBP/USD, EUR/USD, AUD/USD, USD/JPY, USD/CHF, and USD/CAD.

The base currency is the first symbol listed and is always equal to one. The second symbol is the quote currency. The quote will explain how much it costs to purchase one unit of the base currency.  For example, the quote USD/EUR = 0.8567 means one United States dollar costs 0.8567 euros. The opposite would read EUR/USD = 1.8765, meaning that it costs 1.8765 US dollars to purchase one euro. Rates are almost always expressed as five digit numbers.

When the quoted price increases, it means that the base currency is becoming stronger. This means that one unit of the base currency can purchase more of the quote currency. Likewise, if the quote currency price decreases the base currency is weakening. This means that one unit of the base currency can buy less of the quote currency.

Forex quotes are displayed using a bid and ask spread. Usually the symbol is portrayed first, and is followed by the bid price, and then the ask price. The bid price is the amount buyers are willing to pay for the base currency, when selling the quote currency.  The ask price is the amount that traders will sell the base currency for, while buying the quote currency.

For example, the quote EUR/USD 1.2565 1.2568 is meant to inform traders that they can purchase one euro for 1.2568 US dollars, or sell Euro for 1.2565 US dollars. This means as a trader you will buy at 1.2565 and sell at 1.2568. The difference between the buy and ask price is referred to as the spread, and is retained by the forex broker as their profit on the trade.

Quotes are often displayed in chart form. These cross currency charts list a variety of different currencies and the values in comparison to each other. These charts typically list the base currencies down the left side of the chart. The currencies that run across the top are the quote currencies. However, not all cross currency charts are laid out using the same format. For that reason it is essential to know at least one pair of currencies to insure that you are reading the chart correctly.

Understanding how to read forex quotes correctly can help you develop efficient trading strategies and achieve success in the foreign exchange market.



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Introduction to Online Forex Trading
Current Forex Currency Rates
Forex Trading
How to Get Started In FOREX Trading
FOREX versus Futures Market
FOREX versus Stocks
FOREX Trading Philosophy
Fundamental Analysis In Forex Trading
Forex Technical Analysis - Part 1
Forex Technical Analysis - Part 2
FOREX Trading Strategies
Trading Currencies on Margin
Currency Option Marketplace
FOREX Signals
How to Read FOREX Quotes
Calculating FOREX Profits and Losses
Risks of FOREX Trading
FOREX Training
FOREX Trading Software
FOREX Brokers
FOREX Glossary
Forex Updates and Training
Crash Course in Forex Education
How to Recognize Patterns in Forex Trading Markets
Defining Exotic Currencies and Their Impact on Forex Markets
Defining Trading Trend and Ranges in Forex Trading
Mind Games – The Psychology of Forex Market Trading
Crossing Currency - What’s This Mean to Forex Traders
Money Management Basics for Forex Traders
Choosing Your Forex Broker
Expensive Beginner Forex Trader Mistakes
The Elliott Wave Theory for Forex Markets
Failsafe Facts to Guarantee Failure in Forex Trading
Five No Nonsense Strategies in Forex Trading
Global Expansion and It’s Reaches within the Forex Market
Hedging in the Forex Market
The Important Ways to Keep From Losing in the Forex Markets
An Overview of the Euro’s Performance in the Forex Markets
Six Trading Tips for the Forex Newbie
The Lowdown on Day Trading
Interpreting How Interest Rates Drive the Foreign Exchange Markets
The Basics of the Bollinger Band Technical Indicator in Forex Markets
Relative Strength Analysis in Forex Trading
The Basics on Understanding Forex Options
Forex Charts – What Are They and How Do You Read Them
Interpreting the Future of the Oil Marketplace and How It Affects Forex Trading
Top Five Economic Indicators that Drive Forex Trading
Rules for Trading in Forex Markets
How Does the Japanese Yen Stack Up Against the US Dollar in Forex Markets
Pivot Points in Forex
The Ins and Outs of Trying Out a Forex Demo Account
The Top Currencies to Watch in the Forex Trading Game
Defining Moments Regarding Trading Trends and Ranges with Forex
Top Ten Basic Terms in Forex Trading and Their Definitions
Forex Folklore Investment Myths in the Market
Five Economic Driving Forces that Influence Forex Trading
Day Trading All You Wish You Did Not Have to Know
Time line for Daily Forex Trading When are the Optimum Moments
Forex Relative Strength Analysis
How Forex Quotes Can Influence your Trading Tactics
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