Currencies are quoted in pairs, such as EUR/USD or USD/JPY.
The first listed currency is known as the base currency, while the second is called the counter or quote currency.
The base currency is the "basis" for the buy or sell.
For example, if you buy EUR/USD, you have bought euros and simultaneously sold dollars. You would do so in expectation that the euro will appreciate (go up) relative to the US dollars.
In the forex trading market you may buy or sell currency pairs. The objective is to earn a profit from your position. Placing a forex trade in the foreign exchange market is simple: The mechanics of a trade are virtually identical to those found in other markets, so the transition for many traders is seamless.
USD/JPY
The US dollar is the base currency or the "basis" for forex trading. For example, if you expect the Bank of Japan to intervene by selling JPY for political reasons, you would execute a buy USD/JPY order. Here you have bought US Dollars in the expectation that they will appreciate versus the Japanese Yen.
If you expect global sentiment to sift and investors withdraw capital from the US and deposit them in Japanese capital markets, then you would execute a sell USD/JPY order. Here you have sold US dollars in the expectation that they will depreciate against the Japanese Yen.
GBP/USD
The GBP is the base currency or the "basis for the buy/sell.
For example, if you expect the Bank of England (BOE) to raise interest rates indicating a strong economy, you would execute a buy GBP/USD order. Here you have bought the GBP in expectation that they will appreciate versus the USD.
IF you expect the UK economy will suffer from a weak GDP growth period, you would execute a sell GBP/USD order. Here you have sold GBP in expectation they will depreciate against the USD.
Trading Off-Exchange Foreign Exchange Currencies involve significant risk and may not be suitable for everyone. Please read our
RISK DISCLAIMER before investing. Please read our
PRIVACY POLICY.
