Wednesday, February 25, 2009

currency pair in forex trading

The profit in Forex trading is taking from the currency movements. Forex trading also called as currency trading. It is always done in currency pair. Have you got any idea about the currency pair? What it is exactly? How this term apply to the real Forex trading? These questions often asked by the people who start their journey as the Forex trader. The knowledge about currency pair is important before you go further as the trader. You should learn and understand the basic first before mastering the advance technique of Forex trading. There are some other terms you need to know related to Forex. Moreover, in the concept of this currency pair there is also something called numerator which you will learn in a minute. I want to share about this term and related matter. By reading this article, you can gain insight about How Forex works related to the currency pair.

I will explain the currency pair with and example. Let us watch the market today. The exchange rate of USD/IDR on Jan 28, 2009 is 11,351. USD is the U.S Dollar and the IDR is Indonesian Dollars. This number (11,351) is also called as Forex rate. The people in this field say it by “rate”. Let say that you are an investor who wants to buy the Dollars as you have lots of Indonesian Dollar. You want to convert your currency into U.S. Dollar. In short, you bought the U.S. Dollard currency at 11,351. You wanted to buy 1,000 U.S. Dollar, so you transferred an amount of 11,351,000 Indonesian Dollar on Jan 28, 2009.

On at Feb 4, 2009, the exchange rate of USD/IDR is 11,653. How you suppose to read those numbers in the Forex trading? Let me guide you through. First you have to understand the concept of numerator. In this case, the numerator of the USD/IDR ratio is USD. Therefore, by having the data which say that On at Feb 4, 2009, the exchange rate of USD/IDR is 11,653, we can conclude that the value of U.S Dollar increased from 11,351 to 11,653. If you want to sell you U.S. Dollars, you will receive 11,653,000 Indonesia Dollar. From this transaction, you will get 302,000 Indonesia Dollar profit.

From that example you must have grasped the idea about how the currency pair works and how to make profit in the Forex trading. That is the basic knowledge you should really understand.

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