You may think you know enough about the foreign currency market but what’s wrong with knowing some more new things? Who knows what information you could utilize in the future to help you earn more money from your foreign currency exchange deals? No one!
But if you feel, however, that your knowledge on the foreign currency market is still insufficient, you’re lucky as this article will explain what you need to know about foreign currency.
The Base Currency A base rate is fundamentally a currency in which a dealer bases all his accounts on. In most foreign currency markets, the base rate or currency is the dollar. There are however a number of foreign currency markets or companies that use the British pound, the Yen or the Euro instead.
The Balance of Trade This is a factor that always affects the value of any foreign currency. A person will be able to arrive at a country’s balance of trade by deducting its imports from its exports. A negative balance of trade is called a deficit and this is generally a bad sign for any foreign currency.
The Big Figure In a normal foreign currency market setting, it’s seldom that the first two or three digits of a foreign currency would actually vary, increase or decrease significantly. Because of that, most foreign currency dealers and brokers tend to disregard mentioning it when they make quotes. So if the USD/Yen rate is 101.2/101.3, a dealer would usually just say .2/.3
The Cross Rate When two foreign currency rates that are considered non-standard are traded, it becomes known as a cross rate. If you are participating in a foreign currency market in Switzerland, a YEN/Australian Dollar trade is a good example of a cross rate.
The Concept of Day Trading People who are involved in day trading are those who open and close deals on the same day. These people, albeit facing lower risks, are also only able to enjoy lower rate of returns.
The Appreciation of a Currency When a foreign currency you’re trading in favor of is said to appreciate, this simply means that the rate for that foreign currency has increased once more (and that’s to your advantage).
The Trends It’s difficult for most new players to interpret correctly the trends in the market. When you’re able to do so, however, it’s always much safer to make investments that follow, rather than oppose, the trends.
We hope you enjoyed our article. Good luck trading!