Bid and Ask or Buy and Sell

There are always two numbers given after the currency pair, the first always has a smaller numerical value then the second. This can once again be shown using the same example (EUR/USD 1.2660 1.2663). The first number is known as the "Bid" or "Sell" and the second number is known as the "Ask", the "Offer" or "Buy".


The smaller number or the Bid (Sell) (1.2660) represents that price where one can sell the major currency and buy the secondary currency; sell the EUR and buy the USD. The second price the Ask (BUY) (1.2663) represents the price where one can buy the major currency and sell the secondary; buy the EUR and sell the USD.

In the trading window below the trader is able to buy the EUR against the USD at 1.2847 or sell the EUR and buy the USD at 1.2844. The trader is also able to buy the USD against the JPY at 117.60 and sell the USD and buy the JPY at 117.57.


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Currency Pairs

Currency Pairs: Each currency is recognized by a three letter code. For example EUR (is the EURO and refers to the European currency), USD (is the United States Dollar). The worlds leading currencies (often referred to as the majors) are the EUR, USD, JPY (Japanese Yen), GBP (the British Pound or Sterling), CHF (the Swiss franc), AUD (the Australian Dollar) and the CAD (the Canadian Dollar).


Currencies are traded in pairs and are displayed as such. There is always the three letter currency code a slash and another three letter currency code. The first currency displayed refers to the "base", "leading" or "primary currency"; the second currency refers to the "secondary currency".

For instance when looking at the EUR/USD the EUR is the leading currency and the USD is the secondary currency. The "currency pair" or "currency cross" is then followed by a number; this is typically a five digit number with a decimal point after the first, for instance 1.2660.

The number represents the ratio of one currency against the other, and can be read as "the amount of the secondary currency needed in order to have one unit of the major currency". In the example just given, EUR/USD 1.2660, one would require 1 Dollar and 26.6 cents to exchange for 1 Euro.



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Who Trades in the FX Market?

Foreign exchange traders can be separated into two groups, hedgers and speculators.

Hedgers: Governments, companies (exporters and importers) and some investors have foreign exchange exposure. Adverse movements between their local or domestic currency and the foreign currency of the group they are either doing business with (for the exchange of goods and services) or investing in will affect their bottom line. This is the core of all foreign exchange trading; however it only makes up approximately 5% of the actual market.


Speculators: These groups which range from banks, funds, corporations and individuals – create artificial rate exposure in order to profit from the variations or movements in the price.we trade off-exchange forex transactions.

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Basic Concepts

The term Foreign Exchange means the transferring of one currency into another simultaneously. Since currencies are traded in pairs, to profit from an exchange rate move you need to buy the currency that you expect will strengthen and sell the other. For example if you believed that the Euro (EUR) was going to appreciate against the dollar (USD) you would buy the EUR/USD; or in other words buy the EUR and sell the USD. Alternatively, if you believed that the EUR was going to depreciate against the USD then you would sell the EUR/USD; or sell the EUR and buy the USD.


As can be seen there is no need to wait for a bullish market to profit, for at any given moment, one currency will be strengthening against another. The FX market is therefore constantly producing opportunities to invest.

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The FX Market

The Foreign Exchange market which is often referred to as the "Forex" or "FX markets" is the largest, most liquid, most transparent financial market in the world. Daily average turnover has now exceeded 2 trillion USD. All the U.S. equity markets combined do not reach 3% of the total volume traded on the FX market.


Unlike other financial markets, where for the most part you can only profit in rising markets, in the FX market whenever one enters into a position he is long (bought) one currency and short (sold) another currency simultaneously which means as opposed to other cyclical financial markets in the FX markets there are endless opportunities.

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