In our last lesson we started the second module of our forex trading course with a lesson on how to set up a free real-time demo trading account so we can learn the logistics of trading forex in real-time without risking any money. In today’s lesson we are going to begin to learn the logistics of trading foreign exchange, with a discussion of how to read a currency quote.
The first thing we are going to do here is login to our demo trading account so if you have not registered for a demo yet please pause the video here and click register for a free demo at the link above this video if you are watching on InformedTrades.com or in the description section if you are watching on Youtube.
Once logged into the platform the first thing you are probably going to notice is the “Dealing Rates Window” which has a bunch of currency pairs listed and rates which are updating up and down. As you will also notice in this window each currency pair has two rates listed which are moving up and down together in tandem. This is what is known as the bid and ask quotes. For the purposes of this lesson we are going to look at only the ask or second quote for each currency pair as we are going to go over what the bid and ask is in a later lesson.
The first thing that it is important to understand about trading the forex market is that currencies are quoted in pairs. Another way of looking at this is that the value of a currency is always determined by comparing it with another currency.
So for example the first currency pair which you should see in your quotes window is EUR/USD or the Euro/US Dollar currency pair. As of this lesson as you can see in the quote window here the Euro Dollar currency pair is trading at right around 1.5700.
In the foreign exchange market the first currency in the pair is referred to as the “Base” currency and the second currency in the pair is referred to as the counter currency. So with this in mind the quote that you see here is how many of the second or counter currency it takes to buy 1 of the first currency in the pair.
In this example where we are looking at a quote for the EUR/USD of 1.5700 what this means is that it takes 1.5700 US Dollars to buy 1 euro.
Moving across the quote window to the right the next currency pair that we should see is USD/JPY or the US Dollar Japanese Yen currency pair. Notice that in this example the US Dollar is the base currency and the Japanse Yen is the counter currency. As of this lesson the USD/JPY currency pair is trading at 102.36.
So remembering that the currency quote shows how many of the counter currency in the pair it takes to buy 1 of the base currency we know that a quote of 102.36 for USD/JPY means that it currently takes 102.36 JPY to buy 1 USD.
As we discussed in our lesson on the main currencies of the world, the Euro, Yen, Pound, Swiss Franc, Australian Dollar, New Zealand Dollar, and Canadian Dollar are the most actively traded currencies in the world, and the ones that can be traded actively 24 hours a day as a result. As you can see in the quote window here they are all there quoted against the USD.
As you will also notice here however there are currency pairs which include two of these currencies and which do not include the US Dollar. An example here would be EUR/CHF. Currency pairs which do not include the US Dollar are referred to as cross currencies; however the quoting convention works exactly the same.
So as one final example here as of this lesson EUR/CHF is trading at 1.5921. From the above examples we know that this quote is how many of the counter currency it takes to buy one of the base currencies. So with this in mind we know that this quote means that it takes 1.5921 CHF to buy 1 EUR.
For tonight’s homework session I would like everyone to pick two currency pairs quickly and simply list what the current quote is and what that means as I have just done above. If you would like feel free to list it in the comments section just below this video. That’s our lesson for today.
In tomorrow’s lesson we are going to look at what it means when a quote for a particular currency pair increases and what it means when it decreases so we hope to see you in that lesson.
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WEEKLY Forex Economic Calendar: 29 Mar Wed
14:00 US- Pending Homes Sales
14:30 US- EIA Crude 30 Mar Thu
12:30 US- Weekly Jobless
12:30 US- GDP
23:30 JP- CPI 31 Mar Fri
7:55 DE- Jobless
8:30 GB- GDP
9:00 EZ- flash HICP
12:30 US- Core PCE Deflator
14:00 US- final Univ of Mich 2 Apr Sun
00:00 AU/NZ- Clocks "Fall Back"
Forex Market: items driving the forex market:
Event Risk: Solid U.S. data have helped stabilize the USD today. It appears now that unless the Trump Administration can get its legislative act together that the Fed will be forced pursue a cautious policy tightening posture, as opposed to an aggressive one.
Event Risk: Article 50 was signed late Tuesday UK hours by PM May. It will be presented to the EU today at 13:30 CET to the EU. (11:30 GMT).
As expected, a request to the U.K. Parliament for a second Scotland Independence referendum was approved by the Scottish Parliament Tuesday. Odds are the request will not be considered immediately.
There is a growing perception that the ECB might start to consider stepping back from excessive policy ease. Watch flash HICP data Friday. The March German Ifo Survey (Monday) was considerably stronger than expected and will be noted by the ECB.
Lots to consider. Please comment...
John M. Bland, MBA co-founding Partner, Global-View.com
looking for your first broker or do you need of a new one? There are
more critical things to consider than you might have thought.
We were trading long before there were online brokers. Global-View
has been directly involved with the industry since its infancy. We've
seen everything and are up-to-data with recent regulatory changes.
The Global-View Forex Forum is the hub for currency trading on the web. Founded in 1996, it was the original forex forum and is still the place where forex traders around the globe come 24/7 looking for currency trading ideas, breaking forex news, fx trading rumors, fx flows and more. This is where you can find a full suite of forex trading tools, including a complete fx database, forex chart points, live currency rates, and live fx charts. In addition, there is a forex brokers directory where you can compare forex brokers. There is also a forex brokers hotline where you can ask for help choosing a forex broker that meets your individual fx trading needs. Interact on the same venue to discuss forex trading.
The forex forum is where traders come to discuss the forex market. It is one of the few places where forex traders of all levels of experience, from novice to professionals, interact on the same venue to discuss forex trading. There is also the GVI Forex, which is a private subscription service where professional and experienced currency traders meet in a private forex forum. it is like a virtual forex trading room. This is open to forex traders of all levels of experience to view but only experienced currency tradingprofessionals can post.
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Forex chart points are in a currency trading table that includes; latest fx tradinghigh-low-close range, Bollinger Bands, Fibonacci retracement levels, daily forex pivot points support and resistance levels, average daily forex range, MACD for the different currency trading pairs. You can look on the forex forum for updates when one of the fx trading tools is updated.
Global-View also offers a full fx trading chart gallery that includes fx pairs, such as the EURUSD, commodities, stocks and bonds. In a fx trading world where markets are integrated, the chart gallery is a valuable trading tool. Look for updates on the Forex Forum when the chart gallery is updated.
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