Forex Trading: Learn How To Read A Forex Quote

Forex is an abbreviated name for "foreign exchange." The Forex market is a
non-stop cash market where the currencies of nations are bought and sold,
typically via brokers. For example, you buy Euros, paying with U.S. Dollars, or
you sell Euros for Japanese Yen.

The value of your Forex investment increases or decreases because of changes in
the currency exchange rate or Forex rate. These changes often result from
economic and political factors, such as the price of oil or political unrest. To
better understand how the exchange rate can affect the value of your Forex
investment, this article shows you how to read a Forex quote.

Forex quotes are always expressed in pairs. In the following example, your
"pair" of currencies are the U.S. Dollar (USD) and the Euro (EUR). The Forex
quote, USD/EUR = 265.50, means that one U.S. dollar is equal to 265.50 Euros.
The currency to the left of the / (USD in this case) is referred to as base
currency and its value is always 1. The currency to the right of the / (EUR in
this case) is referred to as the counter currency. In this example, one USD can
buy 265.50 EUR, since it is the stronger of the two currencies.

Because the U.S. dollar is regarded as the central currency of the Forex market,
it is always treated as the base currency in any Forex quote where it is one of
the pairs. Incidentally, the U.S. Dollar is involved in nearly 90% of all Forex
transactions.

In this example, your "pair" of currencies are the Japanese Yen (JPY) and the
Euro (EUR). The Forex quote, JPY/EUR= 175.10, means that one Japanese Yen is
equal to 175.10 Euros. The currency to the left of the / (JPY in this case) is
referred to as base currency and its value is 1. The currency to the right of
the / (EUR in this case) is referred to as the counter currency. In this
example, one JPY can buy 175.10 EUR, since it is the stronger of the two
currencies.

The goal of any Forex trading system is to profit from foreign currency
movements. This requires adequate training in basic Forex principles, such as
performing a Technical Analysis, using Forex charts and Stop/Loss tools, and
keeping up-to-date with economic and political events. In a sense, Forex
training never ends.