Before you decide to go further into the world of forex, it's a good idea to first learn how to make transactions in forex. In the forex market, we can buy or sell currencies. Placing a position in the foreign exchange market is very simple, the mechanism of this trade is very similar to other markets (such as the stock market). So if you understand how to make transactions in forex and have experience in trading, you can master it quickly.

The object of forex trading is the exchange of one foreign currency for another in the hope that the price will change and move according to the predictions and analysis that have been made before opening a position/entry position in the market.

So that the currency being traded will increase in value, thus you can get the desired profit. The exchange rate is simply the ratio of one currency valued against another. For example, the USD/CHF exchange rate shows how many US Dollars (US$) can buy 1 Swiss Franc, or how many Swiss Francs you need to buy 1 US Dollar (US$)

How to Read Forex Quotes

Currencies are always quoted/followed or versus in pairs, such as GBP/USD or USD/JPY. The reason they are quoted/followed or versus in these pairs is because in any foreign exchange transaction, we are simultaneously buying one currency and selling another. Here is an example of a foreign exchange rate for the British pound against the US dollar:

The currency listed first to the left of the slash (“/”) is known as the base currency (in this example, the British pound), while the second to the right is called the counter or quote currency (in this example, the US dollar).

When buying, the exchange rate tells you how much you have to pay in the quote currency to buy one unit of the base currency. In the example above, you would pay $1.51258 to buy 1 British Pound.

When selling, the exchange rate tells you how much of the quote currency you can sell for one unit of the base currency. In the example above, you would receive $1.51258 when you sell 1 British pound. The base currency is the “basis” for buying or selling. If you buy EUR/USD, you are buying the base currency and selling the quote currency at the same time. In my everyday language, “buy EUR, sell USD.”

If you are going to buy a currency pair, you must be sure that the base currency will rise compared to the quote currency. Likewise, if you are going to sell a currency pair, you think that the base currency will depreciate (lose value) relative to the quote currency.

Long and Short

First, you have to decide whether you want to buy or sell. If you want to buy (which actually means buying the base currency and selling the quote currency). You want the base currency to increase in value and then you will sell it back at a higher price. In trader speak, this is called “going long” or taking a “long position”. And remember: Buy = Long.

If you want to sell (which means selling the base currency and buying the quote currency). You want the base currency to fall in value and then you will buy it back at a lower price. This is called “going short” or taking a “Short position”. And remember: Sell = Short.

Bid and Ask

All forex quotes are quoted at two prices: the bid and the ask. The bid price is usually lower than the ask price. The bid price is the price at which your broker is willing to buy the base currency in exchange for the quote currency.

This means that Bid is the best available price at which you (the trader) will sell to the market. Ask price is the price at which your broker will sell the base currency in exchange for the quote currency. This means that Ask is the best available price at which you will buy from the market.

Spread In Forex

The difference between the Bid and Ask is known as the Spread. In the EUR/USD quote above, the Bid price is 1.3456 and the Ask price is 1.3458. If you want to sell EUR, you click “Sell” and you will sell euros at 1.3456. If you want to buy EUR, you click “Buy” and you will buy euros at 1.3458.

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