How To Read Currencies

risk of losing

Check our Instrument Specification page to see which currency pairs you can trade on with XTB. Currency values rise and fall against each other due to a number of economic, geopolitical and technical factors. The forex market is the most traded market in the world, with an average turnover in excess of $5 trillion a day. This makes it a highly volatile market and it’s available to trade on 24 hours a day, five days a week . That means when you buy one currency, you do so by selling another.


I could say that, yes, the American dollar is getting weaker but only in the last couple of days, so I need to be very careful as to what sort of trade that I place on that. You can see on the right-hand side of the chart you’ve got a green and pink line. The blue line is where we would enter the trade and sell trade.

How to Read Currency Pair in Forex Market?

When trading a single currency pair, it’s helpful to familiarize yourself with market phase—the market’s current stage of price movement—and then plan accordingly using the right technical analysis. Even if you’ve previously traded stocks and assets, the forex market is a unique game that is vastly different in terms of the data traders need to analyze. NZD/USD represents the value of the New Zealand dollar against the U.S. dollar, or how many U.S. dollars are required to buy a single New Zealand dollar, or the kiwi dollar. New Zealand’s currency is typically listed in the top 10 most popular currencies in the world, while the U.S. dollar is the most traded currency.

japanese yen

In its simplest form, an investor borrows money in a low-interest rate currency and invests in a higher yielding currency, in an effort to profit from the difference in interest rates. The carry trade exposes investors to the risk that exchange rates could move adversely and unexpectedly, reducing or even eliminating the potential for profits. A currency pair is the dyadic quotation of the relative value of a currency unit against the unit of another currency in the foreign exchange market. The currency that is used as the reference is called the counter currency, quote currency, or currency and the currency that is quoted in relation is called the base currency or transaction currency.

How much money is traded on the forex market daily?

64% of retail investor accounts lose money when trading CFDs with this provider. Obviously, on the left, we’ve got a very simple order ticket. And it shows you basically what’s been happening with the euro/dollar during the day. It’s got the bid price and the ask price, and if you’ll notice that the bid price and ask price are the same. That’s because Valutrades spreads say they, 0.0, are excellent. So, you’ll be able to click on this and others, and buy or sell that particular currency after you’ve done your analysis.

When trading currencies, you’re selling one currency to buy another. Conversely, when trading commodities or stocks, you’re using cash to buy a unit of that commodity or a number ofshares of a particular stock. Economic data relating to currency pairs, such as interest rates and economic growth or gross domestic product , affect the prices of a trading pair.


Currency pairs, which can be found within the foreign exchange market, measure the value of one currency against another. The currency pair is split into the ‘base’ currency, which is the first named currency; and the secondary currency, which is called the ‘quote’ currency. The price displayed shows how much of the quote currency is required to buy one unit of the base currency. Currency markets work via a global network of banks, business and individuals that are constantly buying and selling currencies with one another. Unlike most financial assets – such as shares or commodities – the foreign exchange market has no physical location and trades 24 hours a day.

The lira has been revalued many in previous attempts to reduce inflation and has been considered one of the least valuable currencies globally at certain times in the past. The American dollar is one of the top-traded worldwide currencies. This pair indicates the value of the U.S. dollar against the Russian ruble. This pair indicates the value of the Polish zloty against the euro. If you think that the base currency in a pair is likely to strengthen against the quote currency, you can enter a long position (“buy the pair”). Currency pairs compare the value of one currency to another.It indicates how much of the quote currency is needed to purchase one unit of the base currency.

When you place a on a currency pair, you’re essentially buying one currency and selling another – but in a single transaction. So for example, going long or ‘buying’ EUR/USD means you’re buying the euro and selling the US dollar. Going short means that you’re ‘selling’ the Euro and buying the US dollar. The real exchange rate, defined as the nominal exchange rate multiplied by the ratio of price levels, measures the relative purchasing power of the currencies. An increase in the real exchange rate (Rd/f) implies a reduction in the relative purchasing power of the domestic currency.

Read and Calculate Currency Exchange Rates

Commodities can also have an effect on currency pair prices. Commodity currencies are those from countries that have large quantities of commodities or other natural resources. The exchange rate of the currencies of these countries are tied to their respective export activities. This is because the strength of the economy can be highly dependent on the prices of their natural resources. Examples of these countries include Russia, Saudi Arabia and Nigeria. Let’s use an example of spread betting to explain how currency pairs can be traded on, using the words buy/sell to represent long and short derivative positions.

Iran’s currency falls to record low as sanctions to continue – Reuters

Iran’s currency falls to record low as sanctions to continue.

Posted: Mon, 20 Feb 2023 08:00:00 GMT [source]

Look for pairs with low spreads, like EUR/JPY, AUD/JPY, EUR/USD, and GBP/USD. This pair indicates the value of the U.S. dollar against the Singapore dollar, the official currency of Singapore. The currency is issued by the country’s central banking system, the Monetary Authority of Singapore. It’s the 12th-most-traded currency globally and the most traded in Asia. The CHF/JPY currency pair represents how many Japanese yen are required to buy a single Swiss franc.

It is a quotation of two currencies, where the price of one currency is quoted against the other. In a currency pair, we call the first currency a base, and the second currency a quote. A currency pair primarily tells how much of the quote currency an investor needs to shell out to acquire a unit of the base currency.

Currency strength is the main determinant of the price rates of the Forex currency pairs in the financial markets. As most short-term traders prefer news trading strategies, the economic events that influence a currency’s value can create significant market turmoil. The final two currency pairs are known as commodity currencies because both Canada and Australia are rich in commodities and both countries are affected by their prices. The major currency pairs tend to have the most liquid markets and trade 24 hours a day Monday through Thursday. The currency markets open on Sunday night and close on Friday at 5 p.m.

How to read and calculate exchange rates?

Depending on how the rates are quoted, this may require inversion of one of the quoted rates. The FX market is also a truly global market that operates 24 hours a day, each business day. International trade would be impossible without the trade in currencies that facilitates it, and so too would cross-border capital flows that connect all financial markets globally through the FX market.

The first listed currency within a currency pair is called the base, while the second currency that is the benchmark is called the quote. Reading and calculating exchange rates isn’t very difficult, but small errors can lead to big mistakes in some cases. Whether you’re an international investor or a traveler, you can use free tools to help reduce the likelihood of making an error. Double-check your work before making a potentially costly mistake that’s difficult to undo. If you’re traveling, you may only care about getting a rough idea of how much your money is worth, but currency traders that are highly leveraged pay attention to each pip. A small fluctuation in a currency matters a great deal to an international investor determining the impact of a $0.0001 difference on $1 billion in revenue.

And this is the sentiment based on what current Valutraders have open positions. So, in this case—this is an old slide, so don’t make any trades based on this—euro/dollar, for example, 62% of Valutrade traders are long. Forex trading is the simultaneous buying of one currency and selling another.

As in other markets, there are «bid» prices, at which participants are willing to buy and «ask» prices, at which they are willing to sell. Spread is the difference between the two and is most narrow in normal market conditions. A wider spread is possible during the releases of economic data and the European night time.


Forex accounts are not available to residents of Ohio or Arizona. Futures and futures options trading involves substantial risk and is not suitable for all investors. Please read theRisk Disclosure Statementprior to trading futures products. Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Prior to trading options, you should carefully read Characteristics and Risks of Standardized Options.

  • In technical terms, this change or difference in the value of the currency pair is measured in terms of pips.
  • Currency pairs, which can be found within the foreign exchange market, measure the value of one currency against another.
  • Choose asellposition if you believe that the value of the base currency will fall compared to the quote currency.
  • This quotation of the price of currencies in pairs is what we call a currency pair.
  • Trading currencies is risky and requires the appropriate knowledge and experience.

So, if we think—consider—everything as a pair, one of the most important ways to think of – to consider a pair – is gold because we trade gold typically against the U.S. dollar. Of retail investor accounts lose money when trading CFDs with this provider. Majors – these are the most popular and most traded currencies.