Percentage in Point

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Understanding a Forex Quote Posted: 20 Sep 2010 07:44 AM PDT Often when people enter the currency market they get confused about the currency quotations and how they work in currency pair trades. When you read a currency quote it would look like this: USD/JPY = 119.50 This explains that one currency is being expressed in terms of another. In the example above we have taken U.S Dollar as the base and expressed the Japanese Yen in terms of the Dollar. The exammple above is known as a currency pair. As explained earlier, the term on the left is always taken the as the base currency while the currency on the right is taken the quote or counter currency. This example explains that in $1 you can buy 119.5- Japanese Yen. To avoid confusion, you need to learn the abbreviations in which currencies are expressed. Further more, currencies are also expressed in direct and indirect term. In the example above we used a direct currency quote in which the domestic currency is always taken the as the base currency where as in an indirect quote, the domestic currency is the quoted currency. An example of indirect quote would be the reverse of the example explained above where Japanese Yen would be held as the base currency. When you read the direct quote, the base currency would remain constant where as the foreign currency would remain variable where as in an indirect quote, the base currency would be variable where as the foreign currency would remain constant. When you enter the Forex spot market, you would notice that all currencies are compared and traded against the U.S. dollar this means that in most examples the U.S. dollar as held as the base while other currencies vary daily depending on the demand and supply of the currency. However, there are some currencies which do not use the U.S. Dollar as the base price, for instance lets look at the Euro. It is often expressed as EUR/USD = 1.25. This means that for 1 Euro you can buy $1.25.

Understanding Forex Risks and Benefits Posted: 19 Sep 2010 05:17 AM PDT Forex trading is a complicated trade off that has both its risks and benefits. The Forex market is highly liquidized in nature, which is why it is loved by investors, as they can place large trade offs without creating any affect on any exchange rate. This is possible only when there are low margin requirements used by nearly all industry brokers. For a trading sum of US $100,000 there could be US$1,000 as upfront money. The rest will be borrowed by the trader from his broker. In this way the amount can benefit both the investor and the trader. However here is a game of luck. If the rates have a small change, then there is large gains, if the rates have a high change then there is massive loss. Though this is a hindrance, it still doesn't stop traders from trading the Forex market. With the currency market being open 24 hours a day, there is enough liquidity for traders, brokers and investors all over the world. More About Forex The time zone matches up with major industries of the entire world and there is no need to waste time in waiting for a Forex trading unit to open up. Any time of the day, regardless of U.S or Asia, Africa or Australia, you can easily trade with Forex. Being on Forex means, being on high alert for players. There are loads of traders, investors out there and a magnanimous amount of money is involved. Any glitch in trading can turn your massive win into massive loss. When there is any problem going on in the market, traders will at once create changes that will affect the price curve of the currency pair. Consider the following example: You have a leverage on $1,000 in investment, and a control of $100,000 in capital. Now consider putting $100,000 into a currency and imagine the price of the currency moving 1% away from you. You will have a loss incurred at amount $1,000, or possibly with more percentage shifting, nearly all your capital if there is a 100% shift. Keeping these risks and benefits in mind, step into the Forex world with a handful of luck, profound currency and market knowledge as well as the art of being a sharp, talented trader!

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