Welcome to professorsavings.com, we teach finance basics. Today we will teach you about understanding FOREX quotes.
Hi I’m Rayfil Wong. We hope these investment concepts will help you be a better investor.
Looking at any FOREX quote, you’ll notice that all currencies are quoted in pairs such as the China-U.S.
The currency listed before the slash is the base currency. This is the currency you intend to buy or sell. The currency listed after the slash is called the quote currency. This is the price you are paying to buy one unit of the base currency.
For example suppose the quote for the Yuan-U.S. in this instance, the Yuan is the base currency and the U.S. dollar is the quote currency.
To buy one unit of the base currency, the trader will have to pay .16 in the quote currency. Conversely if the traders wishes to sell YUAN, he would receive $1 Yuan
Traders buy the YUAN-U.S. dollar payer, if they believe the YUAN would increase in value relative to the dollar, buying the YUAN-U.S. dollar payer in this way is called “going long the pair” and they would sell the YUAN-U.S. dollar payer called “going short the pair” if they believe the value of the YUAN will go down relative to the dollar.
There are many numerous currency payers for traders to choose from when making a trade in the FOREX market.