Currency Pairs

Currency Pairs

What are currency pairs?

 

In the foreign exchange market, currency is traded in pairs. Pairs have meaning in relation to each other so must always stay together.

The two currencies in a pair are traded one against the other. The rate at which they are traded is called the exchange rate. The exchange rate is affected by currency supply and demand.

 

Most common currencies

 

The most common currencies traded in the market are called 'majors'. Most currencies are traded against the United States dollar (USD). USD is traded more than any other currency. The five currencies most traded next are: the euro (EUR); the Japanese yen (JPY); the British pound sterling (GBP); the Swiss franc (CHF), and the Australian dollar (AUD). Trades of the six major currencies total 90% of the market.

The most common currency pair is EUR/USD.

 

The exchange rate

 

The exchange rate is always changing. The value of one currency is determined by market supply and demand forces, by comparing it to another currency. In a currency pair, the first currency is called the 'base currency'; the second currency is called the 'quote currency' or 'counter currency'.

When you buy a currency pair, you buy the base currency and sell the quote currency. The exchange rate tells buyers how much of the quote currency they need to buy one of the base currency. The order in a pair always stays the same, being a common approach by the industry. USD/JPY, for example, is a pair (USD = base, JPY = the quote). The order within the pair, in the way you use the term, does not change. So you either BUY it or SELL it, depending on the direction of the trade. For example: USD/JPY – you either BUY JPY using USD or you Sell JPY to get USD. On the currency rate table on the Easy-Forex™ website you can view the way in which each pair available for trade is ordered.

Here is an example: EUR/USD 1.2500 means you need 1.25USD to buy one euro. It also means if you sell one euro you get 1.25USD. All trades involve buying one currency and selling another currency at the same time. If in the next day the Euro is rising against the USD and the exchange rate is now 1.26, for every 1 Euro that you bought, you have earned 1USD cent. Or, if you traded the opposite direction, for every EUR that you sold (at 1.25) you lost 1USD cent (since you "buy" back the EUR for 1.26).

 

Buy and sell currency

 

Traders in the foreign exchange market buy and sell currency to try to make profit. There are two prices for currency: the buy price, called the 'BID'; and the sell price, called the 'ASK'.

The difference between the 'bid' and the 'ask' is called the 'spread'. The spread represents the difference between what the market maker gives to buy from a trader, and what the market maker takes to sell to a trader.

For example: the EUR/USD bid/ask rate is 1.2100/1.2200. The market maker gives $1.21 when buying from the trader, but takes $1.22 when selling to the trader. If traders buy and sell immediately without any change in the exchange rate, they lose money. This happens because of the spread – traders pay more to buy the currency than they receive when they sell in that one moment.

In fact, the spread is the leading source of income for the market maker. Like any other market, the merchant will buy at one price and sell at a higher price.

 

Quotes

 

The price of a currency is called the 'quote'. There are two forms of quotes in the Forex market: direct quotes, and indirect quotes.

A direct quote is the price for one US dollar in terms of another currency.

An indirect quote is the price for one UNIT of another currency in terms of the US dollar.

Please note: in general, most currencies are quoted against the USD (e.g. – "direct quote").

But, the EUR, GBP, AUD, NZD (as well as Gold XAU and silver XAG) are indirect quoted, for example: GBP/USD.

The quote is the price to a currency pair that the deal will be made with. This is unlike an 'indication', where the price given by a market maker is only informational (for trader's knowledge, rather than for execution). Real time quotes are provided to Easy-Forex™ logged in users. Delayed quotes ('indication') are provided to the rest of the site users.

Volatility

Volatility

 

Volatility (in Forex trading) refers to the amount of uncertainty or risk involved with the size of changes in a currency exchange rate. A higher volatility means that an exchange rate can potentially be spread out over a larger range of values. High volatility means that the price of the currency can change dramatically over a short time period in either direction.

On the other hand, a lower volatility would mean that an exchange rate does not fluctuate dramatically, but changes in value at a steady pace over a period of time.

Commonly, the higher the volatility, the riskier the trading of the currency pair is.

Technically, the term "Volatility" most frequently refers to the standard deviation of the change in value of a financial instrument over a specific time period. It is often used to quantify (describe in numbers) the risk of the currency pair over that time period.

Volatility is typically expressed in yearly terms, and it may either be an absolute number ($0.3000) or a fraction of the initial value (8.2%).

In general, volatility refers to the degree of unpredictable change over time of a certain currency pair exchange rate. It reflects the degree of risk faced by someone with exposure to that currency pair.

 

Volatility for market players

 

Volatility is often viewed as a negative in that it represents uncertainty and risk. However, higher volatility usually makes Forex trading more attractive to the market players. The possibility for profiting in volatile markets is a major consideration for day traders, and is in contrast to the long term investors' view of buy and hold.

Volatility does not imply direction. It just describes the level of fluctuations (moves) of an exchange rate. A currency pair that is more volatile is likely to increase or decrease in value more than one that is less volatile.

For example, a common "conservative" investment, like in savings account, has low volatility. It will not lose 30% in a year but neither will it profit 30%.

 

Volatility over time

 

Volatility of a currency pair changes over time. There are some periods when prices go up and down quickly (high volatility), while during other times they might not seem to move at all (low volatility).

Forex Market Makers

 

What is a market maker?

 

A market maker provides a platform for foreign currency exchange for the customer.

Market makers know the current cost of investing in the market. They study the buy price and the sell price in foreign exchange. Market makers can help customers to reduce the chances of losing money in the market. They are neither an agent nor an intermediary.

 

Who are the market makers?

 

Banks or foreign exchange businesses like Easy-Forex™ are examples of market makers. They buy and sell finance resources. They do not charge a percentage to serve each customer.

 

Do market makers go against a customer's position?

 

Market makers work with customers. They buy and sell to people who want to enter the market. They always tell customers both rates: the buy rate and the sell rate. Market makers do not advise customers. Market makers do not act for customers. They help because they can give expert information about different finance positions. Market makers have good policy to reduce risk. Authorities guide the way market makers act.

 

Do market makers and customers have opposite interests?

 

Market makers always provide the buy price and the sell price. Customers always know both prices. Market makers are neutral. They do not try to increase their profit by decreasing the customer's profit. The trade process is based on supply and demand.

 

Who can influence the market?

 

The forex market is huge, with trillions of dollars transacted daily and a constant online flow of information across the world. This makes it difficult for an individual trader (person or organization) to influence the market. Easy-Forex™ gives you access to to this exciting market through its online trading platform.

 

How does Easy-Forex™ make profit?

 

With foreign exchange, there is a different price to buy and to sell. This difference is called the 'spread' and it is where Easy-Forex™ earns money, making a small profit on each deal. Accordingly, Easy-Forex™ maintains neutrality (as for the direction of any deals made by its clients), since the leading source of its income is in the spreads.

 

What is the risk for market makers?

 

Market makers deal with large amounts of finance and trade. They can combine all their client's money and use banks to reduce risk. This is called hedging their exposure and by combining all the money, they hedge in bulk giving them a much stronger position. Easy-Forex™ works within relevant international regulations as well as its own risk management policy. It cooperates with the world's big banks: UBS (Switzerland) and RBS (Royal Bank of Scotland).

( 联盟主席李军为专家颁发聘书 Li Jun, Chairman of tourism organizition for eight recommanded new scenic spots, presented appointment letters to the experts on the fields of tourism.)

红网张家界9月13日讯（记者喻向阳）一批热爱旅游创新的团队造就了新潇湘八景。今天，由湖南省旅游学会倡导的“新潇湘八景品牌联盟”（全称为“新潇湘八景暨湖南知名旅游品牌联盟”）在张家界成立，联盟组织机构和由18位专家、学者组成的联盟专家团也随之产生。湖南省副省长甘霖，省政协原副主席游碧竹、姚守拙出席联盟成立大会。
Rednet Zhangjiajie----A group of travel-loving team created a brand of "eight scenic spots in Hunan" . The "Union of new eight scenic spots in Hunan" was founded in Zhangjiajie On September 13 according to Hunan Institute of Tourism's advocation. The Union has18 experts and scholars for scentific developments of these scenic spots in Hunan province. Lin Gan Vice Governor of Hunan province , You Bizhu former vice chairman of CPPCC of Hunan province and Yao Shouzhuo attended the estiblishment meeting of the union .