Are you ready to trade forex? Here i have prepared a complete step-by-step guide on what you need and how you can learn to start trading forex. As you would already know, Forex is the largest market in the world and it is one of the very interesting fast paced markets to trade on. Forex trading in the currency market has in the past only limited to large financial institutions, central banks, hedge funds, big corporations and a few wealthy individuals. Things have changed however in the past decades since the emergence of the internet. The internet has made it possible for virtually everyone to be able to buy and sell currencies whenever and wherever they want with just the click of the mouse. As such, it is good if you can sieze this opportunity to learn how to trade forex in the currency market. Once you have mastered the rules of the trading game, it would be very easy. But before you start your trade, there are a few things that you need to understand beforehand. They are:

• What Is Currency Quotes

• Types Of currency Quotes
  

Currencies are always traded in pairs such as USD/EUR and CAD/USD. So, When quoting a currency, it is done in relation to the other currency in the pair. Take USD/EUR for instance, if the exchange rate between the USD (U.S. Dollar) and EUR (Euro) is currently 0.6743, then the forex quote would show like this :

USD/EUR = 0.6743

In this currency pair, it simply means 1 USD values to 0.6743 EUR. So, if the value goes up, it means the USD has appreciated against EUR, and if the value goes down, the USD is said to have depreciated against EUR. Generally, day-to-day currency movements are usually very small, in a matter of less than 0.01 or 1 cent equivalent. Therefore, the price of the currency is normally quoted in 4 decimal points (with the exceptions of currencies such as the Japanese YEN).

The forex market is very huge and it is also a very liquid market. Forex market is so huge because there are always people needing to exchange currencies 24 hours a day in every corner of the world making it one of the best markets to trade in.

You can read Learn Forex Trading Introduction to know more about forex trading and how to trade currency.

Looking back at the USD/EUR quote example, the currency on the left side of the quote (in this case the USD) is called the base currency and the currency on the right side of the quote (the EUR) is called the quoted currency. The base currency is always at a value of 1 unit, in this case is 1 US dollar. The quoted currency simply means the value amount that can be obtained by exchanging 1 base currency. Hence, 1 US dollar = 0.6743 Euro.

There are basically two types of currency quotes when quoting a currency pair. They are:

• Direct Currency Quotes
• Indirect Currency Quotes

Direct Currency Quotes

Direct currency quotes imply that in any currency pair, the base currency is the local currency while the quoted currency is a foreign currency. Simply put, say if you reside in the United States and the U.S. Dollar is your local currency, the USD/EUR as shown in the previous example is your direct quote. It shows that your 1 unit local currency (the USD) buys 0.6743 Euro.

Indirect Currency Quotes

Indirect currency quotes on the other hand means that in a currency pair, the quoted currency is the local currency while the base currency is a foreign currency. So an indirect currency quote of the previous example would be EUR/USD as opposed to the direct currency code of USD/EUR. In this case, the EUR will be fixed at 1 unit. In this indirect currency quote, the exchange can be calculated by inversing the exchange rate value, hence:

1 EUR = (1/0.6743) USD.

= 1.4830 USD

In other words, 1 EUR buys 1.4830 USD.


The top 6 most actively traded currency pairs in the forex market are the EUR/USD, USD/YEN, GBP/USD, USD/CAD, USD/CHF and AUD/USD ranked in the most active order.

Read Currency Trading Tips to learn about tips and common methods currency traders used to trade currency.

Before you can start trading forex however, you will first need to open a Forex Currency Trading Account.

Continue on reading Forex Currency Trading Account