Currency exchanging market named Forex is the biggest financial market in the world. Its turnover exceeds 1 billion dollars per day. This is 30 times more than the turnover of all US stock markets in total.
The main principle of trading on Forex is currency exchange that implies selling one type of currency and buying another one. The currencies are usually traded in pairs. For instance this can be euro/US dollar pair (EUR/USD) or US dollar/Japanese yen (USD/JPY)
There are two reasons of currency trading. About 5% of daily Forex turnover is made by companies and government establishments that sell and buy goods and services in other countries or need to convert profits made in other countries into national currency. The rest 95% are made by deals for getting direct profit. These deals are also called speculative deals.
The trade is arranged in currency pairs like USD/CAD (US dollar/Canadian dollar). The first currency in the pair is called basic. US dollar is the main currency on Forex market, it is basic for many Forex rates. The rate is defined as the price of one US dollar in the second currency in pair. For instance, if the pair is USD/JPY has a rate of 120.5, this means that one US dollar costs 120.5 Japanese yen. You can find a clear and detailed explanation of how trader ‘reads’ and uses different rates by an example of margin trade at FIBO Group website.
If a USD is a basic currency and rate grows, this means that dollar’s price in second currency becomes bigger, while the second currency becomes cheaper relatively to dollar. The US dollar can be not the basic currency in pairs with British pound (GBP), Australian dollar (AUD) and Euro (EUR). There can be pairs like GBR/USD or AUD/USD. Here the rate and US dollar price have the opposite relation: the bigger is the rate, the cheaper is US dollar.
These are the basics of currency rates on Forex market. To understand the mechanism of trading in full, you will need to find out a lot of other terms, strategies and approaches. Activity on Forex market will be successful, if you are going with the times, developing your knowledge and using up-to-date trading technologies. It is better to start with thorough Forex education consolidated by proper practice with efficient intellectual and technical support. Starting with FIBO Group holding, you will get the necessary basis for successful career of online Forex trader.