FOREX CURRENCIES: Questions and Answers for beginners
Hello I m new to this where does a newbie start if wanting to get into forex tradnig and also how can i learn to operate the forex platform ?
If I decide to only trade the 4 strongest currencies ...is this a wise move ?
Absolutely. In fact, the more you focus on a particular trading pair, the more you will learn about this pair, its volatility, behavior around turnign points and breakouts, the speed and potential of sell offs and rallies, the tendency and average duration of time the pair stays in a range, the accuracy of forming and following various pattern formations etc.
All that can be learned if you master your currency pair (you may take 2-3 at the time, possibly 4). Trying to trade all possible currency pairs at once often creates a small chaos in your head and on your charts and may impact your trading as well as your wiling to continue learning.
In most of the trading platform, EUR/USD Bid and ask prices are mostly 5 digits after the dot. But in my forex lesson i was taught with 4 digits after the dot to set take profit (TP) stop loss(SL) and at price. This is under fundamental trading with news. But whenever i place a pending order in my computer, it will prompt me invalid TP/SL. Kindly pick an assumed market price using 5 digits after the dot to illustrate this point. Thanks
The most common way to display EURUSD chart prices is by using 4 digits after the dot - the way you were taught in the lesson.
Nowadays, some trading platforms introduce 5 digits, where the fifth one is simply a fractional pip called "Pipett"
1 pipett = 1/10 of a pip.
Since your platform uses 5 digits after the dot, you'll need to type in all 5, the fifth one can be typed as "0":
For example, currently EURUSD is traded at 1.3237
On your platforms it'll be equivalent to 1.32370
Why brokers introduce pipettes?
The goal is to further reduce spreads.
With the extra digit of precision, it is possible to adjust rates to a finer level, which gives greater flexibility in pricing.
Which pairs trend more than others?
In general most trending pairs are:
EUR/USD
GBP/USD
USD/JPY
GBP/JPY
AUD/USD
USD/CHF
Speaking about smooth trends, take:
USD/JPY
EUR/GBP
Speaking about largest price shifts with lots of pips on the table, take:
GBP/JPY
GBP/USD
Are there currency pairs that go the same way?
Yes, there are currency pairs that move the same direction. They are called correlated pairs. The level of correlation determines the similarity in the currencies' moves.
There are pairs that move in the same direction almost mirror-like:
EUR/USD and GBP/USD
AUD/USD and EUR/USD
And pairs that move mirror-like, but in opposite directions:
EUR/USD and USD/CHF
GBP/USD and USD/JPY
By knowing which currencies have the highest chances to reflect each other moves traders can diversify the portfolio, instead of putting all eggs in one basket.
Further reading and examples of other currency pairs at:
Currency correlation Forex
Is there any chance the GBP will go back to the old value against the Euro (1.5 approximately in November 2007) or is it going to lose even more ground ?
Should the GBP recoup ground against the Euron, when will it happen? What is the possible scenario GBP/EURO in the next 6 months and in the next 12 months?
In the upcoming week or two (end of August, beginning of Sept. 2008) the pair is expected to attempt few more corrections approx. to 07930 level, from which prognosis is bullish with a target at 0.8090.
Overall, the pair is expected to remain within 0.79 - 0.81 area for 2008 year with, so far, the same expectaions for the beginning of 2009.
when do sell chf and when do we buy it?
i heard that when the price increase in front of chf that means the usd is going up and chf is going down so in this case we sell chf ? is that right
When trading USD/CHF pair: USD is the base currency and CHF is a counter currency. The base currency is always equal to 1 unit, in our case 1 USD. The counter currency represents the amount of that currency needed to purchase 1 unit of the base currency (1 USD).
So, for example, when USD/CHF is trading at 1.55 it means that it takes 1.55 Swiss francs to buy 1 US dollar.
Looking at USD/CHF charts: When the price moves up, it means that USD is getting stronger and CHF is getting weaker. When price moves down - USD is getting weaker and CHF is getting stronger.
When we buy USD/CHF pair we sell CHF in order to get USD. On a trading platform you simply use a Buy order to indicate that you want to buy USD/CHF pair, because you believe that the pair is going to trade up and the US dollar is going to get stronger.
When you feel that the pair has moved up enough and is about to descend, you Sell USD currency back and Buy CHF. On Forex trading platform is is done by simply creating a Sell order for USD/CHF pair.
say how to calculate P/L statement from trading
Forex platforms allow to download trading statements. No need to perform calculations. Ask your broker how to download the statement on your particular trading platform, or let me know which platform you use.
What of in case USD/CHF are getting down at a time won't u sell both. And again if u sell CHF FOR USD then which one are u going to use to replace it. And how do u diversify ur trade to avoid loss and in which way
Currencies move down or up in relation to other currencies. So, when you say that both USD and CHF are moving down, this means you'll be using a measure/relation to evaluate it, for example, in relation to EUR; or, for example, if you have Gold assets, you'd say that USD has moved lower comparing to last year, referring to gold and so on.
Lets look at USD/CHF operations:
Operations
USD
CHF
Buy 1000 USD at the exchange rate of 1.06
+1000
-1060
Sell 1000 CHF at the exchange rate of 1.07 1 day later
-1000
+1070
Results
0
+10
By purchasing 1000 USD for CHF and selling it 1 day later, we've got a profit of $10.
Risk diversification is done by trading several currency pairs with low correlation in between them, e.g. currencies which tend to move independently more often then reflect/mirror to each other moves. You never put all eggs in one basket, so you never open similar trades for EURUSD and GBPUSD, for example, as they have high correlation coefficient.
I'd suggest to review the topic of currency correlation to get a better idea.
I am the dummiest trader maybe..because I want to start forex but I dont know about it at all. What I know is only that this is the best platform to earn money..where can I find the right website that can help me as a dummy here? Thank you.
GBP/JPY considered as one pair and is this pair is traded against GBP/EUR .Can explain the pair concept in Forex trade
Start with this site!
Hi, I want to clarify more about buy & sell in currency trading. Let's use USD/CHF as an example. If I want to buy (go long) USD/CHF, meaning that I will buy USD and sell CHF right? If this is the case, is it the CHF is sell by broker to other trader or how? I still not understand about this mechanism. Tq
make sure usd going 54 to 55 it is possible..