FOREX OPERATIONS

Currency pairs are traded in forex market either buying or selling. The pairs have a unique notation that indicates the currencies being traded. The symbol for currency pairs is in this format ABC/DEF, the fraction expresses currencies of nations that are traded together taking into consideration the value of each national currencies in deciding as to whether to buy or sell such currency. In forex trading you will always need to compare one currency with another currency to make a trade possible. Some of the common pairs are:
 EUR/USD (dollar euro), USD/JPY (dollar yen), GBP/US(dollar cable), USD/CAD (dollar Canada), AUD/USD (aussie dollar), USD/CHF (dollar swissy), EURO/JPY (euro yen).The numerator is called the base currency while the denominator is the counter currency. When you place an order to buy or sell USD/CAD for instance, you are actually buying the USD and selling CAD and vice versa (i.e. if you are to sell the pair you are selling USD and buying CAD).

Interpreting currency quote
For instance if a quote like this is given: <<USD/JPY:108.16/19>>
It means the first component before the slash refers to the BID (what you obtain in JPY when you sell USD).In this quotation, the bid price is 108.16.The second component after the slash is used to obtain the ask price ( what you have to pay in JPY if you buy USD).In this example, the ask price is108.19.The difference between the bid and the ask price is called the spread that is .03 or 3 pips.

Buying and selling
Buying in foreign exchange is called going long while selling in foreign exchange is called going short. Trading forex require you to have a trading system or strategies that will guarantee profit.
 So, here is the two timeless rules of investing
RULE 1-Cut your losers; let your winners ride
RULE 2-Do not trade forex without placing a stop loss order.
Anytime you place an entry order and stop loss order simultaneously you have just prevented a potential loss from running too far. In other words before placing a trade you must have figured out where you would likely go wrong in your predictions so as to be on a safer side.


Trading Rules
•       Discipline: Stick to a trading pattern/system.
•       Greed is your enemy.

 



    

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