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New to 4x
Why Forex?
History of Foreign Exchange
Foreign Exchange Basics
Frequently Asked Questions
4x Time Chart (Adobe pdf document)
Foreign Exchange Basics
This market is also called the spot market. It is where traders come to trade the US Dollar. All currencies trade in pairs, which offer equal risk for short and long positions, because one of the currencies will always be on the bullish side. For example, entering a long position on USD/JPY means that you are going long on the US Dollar (USD) and short on the Yen (JPY), and it works the same way when you enter a short position on USD/JPY, in which you are actually going short on the USD and long the YEN.
When looking at a currency pair, the first currency is the base currency - this one drives the direction of a trade. The second symbol is the quote currency - which exchange rate value will move in relation to the base currency.
For example, with the USD/JPY pair, the USD is the base currency and the JPY is the quote currency. If the base currency is higher in value than the quote currency, the trend will be moving higher and if it is lower in value, the trend will be moving down.
Each currency in a pair has a specific role
Reading a foreign exchange quote can be quite simple if you remember two things:
• The first currency is the base currency
• The second currency is the quote currency
The following six major currency pairs represent for more than 80% of currency trades:
• EUR/USD - Euro vs. US Dollar
• USD/CHF - US Dollar vs. Swiss Franc
• GBP/USD - Great British Pound vs. US Dollar
• USD/JPY - US Dollar vs. Japanese Yen
• USD/CAD - US Dollar vs. Canadian Dollar
• AUD/USD - Australian Dollar vs. US Dollar
PIPs
PIPs are the unit of measure whereby you make or loose money. As the PIP's increase so does your account value. Each PIP is worth a certain amount, depending on the currency.
A PIP or Price Interest Point is represented by the last digit in the currency quote.
Currency Pairs Exchange Rate
As this last decimal place increases or decreases, you will make or lose money.
USD/JPY 105.00
USD/CHF 1.1930
EUR/USD 1.2830
Who trades in the FX Market?
. Governments and Central Banks
. Banks and Investment Banks
. Hedge Funds
. Businesses
. Investors and Speculators
. 24 Hours - 5.5 Days/Week Trading
Note: The Foreign Exchange market is open for trading five and a half days a week, 24 hrs per day. This is a major advantage over the stock market, where you can only trade during the market hours. This means that you can trade morning, noon, or night. The Forex market begins each day in Sydney , and moves around the world as the market day begins in each financial center, i.e. Tokyo , London , and then New York . Unlike any other financial market, investors can respond to currency fluctuations caused by economic, social, and political events at the time they occur - day or night, Sunday afternoon through Friday afternoon without worrying about the markets being closed.
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