Fx pairs explained
The spread represents your cost to trade with the broker. Spreads can vary significantly from broker to broker so it is very much in your interest to trade with the broker offering the best i. Trading in the Spot Forex Market. Putting It All Together. This is for general information purposes only - Examples shown are for illustrative purposes and may not reflect current prices from OANDA. It is not investment advice or an inducement to trade.
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Forex Tutorial: Reading a Forex Quote and Understanding the Jargon
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To block, delete or manage cookies, please visit aboutcookies. Restricting cookies will prevent you benefiting from some of the functionality of our website. Download our Mobile Apps Currency Converter App Forex Trade App. Currency Trading Conventions — What You Need to Know Before Trading. The exchange rate describes the price for which the currency of a country can be exchanged for another country's currency For example, the most commonly-traded currency pair consists of the euro and the U.
Anatomy of a Currency Pair The first currency listed in the currency pair is called the base currency; the second currency is referred to as the quote , or sometimes counter currency.
When published with an exchange rate, the currency pair indicates how much of the quote currency is required to purchase one unit of the base currency.
Currency Pair
When selling a currency pair, the exchange rate shows how many units of the quote currency you will receive when selling one unit of the base currency. By enforcing these strict standards on how to refer to currency pairs, mistakes are reduced and it is easier to keep exchange rates organized and clearly understood.
When trading currency pair derivatives you are not trading the underlying; you are trading a derivative of this market. Exchange Rates and Spreads Each currency pair listed by your broker is accompanied by an exchange rate that shows the bid and ask price for the currency pair. The bid price is the rate that your broker is willing to pay for the currency pair; in other words, this is the rate you receive if selling to the market. The ask price is the rate at which your broker is willing to sell and represents the rate you must pay to buy the currency pair.
The bid price is always less than the ask price because brokers pay less than they receive for the same currency pair.
Currency Pair
This difference — known as the spread — is how your broker generates much of its revenue. The illustration at the top of this page shows how brokers typically display a currency pair to show the current bid and ask price. In this example, the bid is 1. The bid price is always shown before the ask, and because the difference between two prices tends to be very small, brokers usually only display the last two digits when showing the ask price.
Trading in the Spot Forex Market 3. Losses can exceed investment.