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What is the need of a Currency Pair?

  • July 2014
  • Posted By Ninoslav
  • 0 Comments

The Foreign exchange market is much important for traders and those business people who want to spread globally and deal with any other country. Thus, business with international market completely depends on the currency of other countries.  You should know about Currency pair.

Fundamental for Trading of Currency pair
How do you start trading? Before using a pair of currency, you should know about the two sides of this pair. A counter currency or quote currency is the reference currency and in relation that is to be quoted is known as a base currency. You will have to know that how much quote currency is required to purchase one unit of a transaction currency or a base currency.

Now, if you desire to sell a currency pair then you have to know that how much you will get after selling one unit of base currency.

How will you trade?
A broker will help you to trade, but he will ask rate of purchasing and selling just according to your need. The price which is officially quoted is known as spot price. But for trading the price that is offered is known as ask price, but a broker always tries to buy at a low price than the ask price. The value of a ‘bid price’ is always less than that of ‘ask price’ and the difference is known as a Spread.

However, this difference is very small to each unit.

Knowledge of various terms
The Currencies which are most traded pairs are known as Majors. They share the largest part in the foreign exchange market.

Sometimes a pair does not involve the local currencies and this type of pair is known as cross pair. Some of the currency pair is known by its nickname like ‘Cable’ is used for a major trading between GBP/USD quote.  The complete knowledge is also helpful to know “How a trade will be perfect by knowing currency strength”.

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