We had previously learnt how forex quotes are written, for example EUR/USD =1.1800 this means the number of US. dollars needed to buy one Euro are 1.1800. Simple right lets move on to more on forex quotes,
This quotes tell you the following when buying, the exchange rate tells you how much you have to pay in units of the quote currency to buy one unit of the base currency.
Also when selling, the exchange rate tells you how many units of the quote currency you get for selling one unit of the base currency.
The base currency is the “basis” for the buy or the sell. If you buy EUR/USD this simply means that you are buying the base currency and simultaneously selling the quote currency. In simple terms, “buy EUR, sell USD.”
You would buy the pair if you believe the base currency will appreciate (gain value) relative to the quote currency. You would sell the pair if you think the base currency will depreciate (lose value) relative to the quote currency.
Long/Short Positions
After you have determined whether you want to buy or sell.
If you want to buy (which actually means buy the base currency and sell the quote currency), you want the base currency to rise in value and then you would sell it back at a higher price. In FX talk, this is called “going long” or taking a “long position.” An easy way to remember: long = buy.
If you want to sell (which actually means sell the base currency and buy the quote currency), you want the base currency to fall in value and then you would buy it back at a lower price. This is called “going short” or taking a “short position”. Just remember: short = sell.
Always choose either long or short.”
Bid/Ask Quotes
EUR/USD forex quote; sell-1.3456/buy-1.3458
A question to ask How come the quotes are two prices?
The answer all forex quotes are quoted with two prices: the bid and ask. Mostly, the bid is lower than the ask price.
The answer all forex quotes are quoted with two prices: the bid and ask. Mostly, the bid is lower than the ask price.
The bid is the price at which your broker is willing to buy the base currency in exchange for the quote currency. This means the bid is the best available price at which you (the trader) will sell to the market.The ask is the price at which your broker will sell the base currency in exchange for the quote currency. This means the ask price is the best available price at which you will buy from the market. Another word for ask is the offer price.
The distinction between the bid and the ask price is popularly known as the spread.
On the EUR/USD quote example, the bid price is 1.34568 and the ask price is 1.34588.
If you want to sell EUR, you click “Sell” and you will sell euros at 1.34568. If you want to buy EUR, you click “Buy” and you will buy euros at 1.34588.
Lets move to WHEN TO BUY OR SELL A PAIR….
Leave A Response