When talking to people who have never tried auto forex trading before, even if they come from the world of stocks, bonds, or futures , it always reminds me that sometimes even the most basic foundational elements of this global powerhouse of a market have to be explained . So let’s jump right into what the pairings mean, what the main pairings are, and what the cross pairings are .
Currency pair. What is it? Let’s start with the Eur/Usd which has against the Euro, the US dollar as the bas currency within this pair. When I see a price quote of 1.3200 on the Eur/Usd, what does it mean ? To remember this answer the easy way, do this: take your currency pair base , which is the US dollar in this case , take a look at the 1.3200 price quote , then you say, " 1.3200 US dollars are needed to purchase 1 Euro." That is exactly what that price quote means . Perhaps a few months later you check out the price quote and it is suddenly 1.4000 this means that against the Euro the US dollar has become weaker since it now will take you 1.4000 US dollars to purchase just one Euro. Conversely , if a couple months later the price quote is then 1.25000 , then the US dollar has gained strenght because you’ll only need 1.2400 US dollars to purchae a Euro.
Auto forex trading can become even more challenging when for the Usd/Jpy pair you see a price quote that is 100.50. Well, using our method from above , simply take the base currency of Jpy and look at the price quote of 100.50 and to purchase one US dollar this is the amount of Jpy it takes . That is fairly simple, isn’t it ? Now you will have no difficulty understanding the price quote on any pair when looking at a quote window or even a chart screen.
Now that price quotes can be read, what are the main pairs and cross pairs ? The main pairs are the world’s strongest economies agasint the US dollar . A few of these pairs are Eur/Usd, Gbp/Usd, Aud/Usd, Usd/Cad, Usd/Jpy, and Nzd/Usd . The US dollar is not involved in a cross pair including the Eur/Gbp, Eur/Jpy, and Gbp/Jpy to name several popular options .
Hopefully this article will be of help to you if you have been intimidated by the auto forex trading landscape before . It can take a while to get used to it with all the time zones, economies, and currency pairs out there. After you start understanding how everything falls together it really is not too hard – and to many, this is a whole lot of fun!
