Forex Beginners - Currencies Continued

“The slave has but one master; the man of ambition has as many as there are people useful to his fortune” - Jean De La Bruyene

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In the last article we talked about currency pairs. Today we will discuss that further along with a short explanation of cross currencies and cross rates.

CURRENCY PAIRS

Trading forex involves the simultaneous buying of one currency and selling of another. When you purchase a currency pair, you buy the base currency and sell the quote currency and in this way it operates as a single unit. The bid or buy price denotes how much of the quote currency is needed for you to get one unit of the base currency.

Opposite to this, when you sell the currency pair, you sell the base currency and get the quote currency. The ask or sell price for the currency pair denotes how much you will get in the quote currency when you sell one unit of base currency.

CROSS CURRENCY PAIRS

A foreign exchange transaction in which one foreign currency is traded against a second foreign currency is called a cross currency pair. For example; AUD/JPY.

One foreign currency is traded for another without having to first exchange the currencies into US dollars.

In days gone by, it was required that to exchange a sum of money from one currency to another (eg. AUD to JPY) it would first have to be converted to US Dollars, then exchanged into the actual currency wanted. Thankfully this is no longer necessary.

CROSS RATE

The cross rate is the currency exchange rate between two currencies, both of which are not the official currencies of the country where the exchange rate quote is given. Cross rate is also a term used to refer to currency quotes which do not involve the U.S. dollar, regardless of which country the quote is provided in.

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This is a very comprehensive chart enabling exchange rates - here.

This is an interesting site for conversion as well - here.

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Happy and prosperous trading everyone !

Rickrufus - Millionairemumma