Forex

Cross Currencies

The five “major” currencies are the US Dollar (USD), the Euro (EUR), the Swiss Franc (CHF), the British Pound (GBP) and the Japanese Yen (JPY). These currencies are usually quoted in terms of the base currency USD, such as USDEUR. When these currencies are quoted in terms of each other rather than the USD, such…

Spreads

Never believe the statement that forex trading is commission free. The last time we looked, forex trading wasn’t a charitable enterprise. What these brokers are endeavouring to say is that while, no, they don’t charge a traditional brokerage – in the sense that you pay $30 to buy and sell forex – the commission instead…

Margin

In forex, the margin is the miminum amount – or deposit – required to place a trade. Think of margin and deposit as interchangeable terms. Many brokers offer leverage of 100 to one, which means that your $1,000 deposit can get you as much as $100,000 in currency. Or, putting it another way, if you…

Currency correlation

Most forex traders stick to the ‘majors’, which are USD based exchange rates and are therefore the most heavily traded. The majors are EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD. The EUR/USD and the USD/JPY are typically the most popular. Because the majors are based on the USD, in a normal market, particular currency pairs exhibit fairly…

Pips

In forex-speak a spread is measured in pips and relates to the difference between the value of the bid and offer. For example, if the Pound Sterling against the US dollar is 1.7443/48, a trader is able to buy the Sterling at the offer price of 1.7448 and sell at the bid of 1.7443. The…