In currency pairs (Currency Trading), currencies have their own symbolic representation to distinguish. Currency Trading is the world operate in pairs – the value of one currency rises or falls compared with another. Each currency has a 3-letter abbreviation, and the first currency in any pair is called the base currency. The price at any given time tells us how much of the base currency is needed to equal exactly one unit of the quoted currency.
For example, when the Currency Trading EUR / USD is priced at 1.5 this means that US $ 1.5 are needed to exchange for 1 Euro. If the value of the euro rises, then the price of EUR / USD will also rise, since it will take more dollars to buy one euro. Likewise, if the value of the euro lower, then the price of EUR / USD also lower, because now you need fewer dollars to buy one euro.
Since currencies are quoted in terms of the value relative to each other a Currency Trading includes the “name” for both currencies, separated by a slash “/”. The “name” is a three-letter acronym. The first two letters are reserved in most cases to identify the country. The last letter is usually the first letter of the name of the currency of that country.
USD = United States Dollar
GBP = Great Britain Pound, British Pound
JPY = Japan, Yen, Japanese Yen
CAD = Canada Dollar, Canadian Dollar
CHF = Confederatio Helvetica (in Latin Swiss Confederation) Franco
NZD = New Zealand, New Zealand Dollar
AUD = Australia Dollar, Australian Dollar
NOK = Norway Krona, Norwegian Krone
Krona SEK = Sweden, Swedish Krona
The Euro is not in a particular country, you simply attributed stands for EUR
Combining with another currency such as the US, with USD, we have the EUR / USD.
The most liquid Currency Trading
The Currency Trading, like stocks and bonds, have pairs that are very liquid currencies and others are not. The liquidity of the currencies can be characterized as those pairs that involve both economically and politically more stable economies. They include the countries that form the G7 – the United States, Japan, Britain, France, Germany, Italy and Canada.
The most liquid currencies including the US Dollar (USD), the Japanese Yen, the British Pound, the Euro and the Canadian Dollar. It is estimated that activities in these currencies comprise more than 80% of the daily volume of transactions Currency Trading.
Base currency and counter currency
One currency in a currency pair is always more dominant than the other, and you call this currency as base currency. The base currency is identified as the first currency in a Currency Trading. It is also the currency that remains constant to determine the price of the currency pair.
The Currency Trading quoted is not the only factor in the value of a given pair. Any change in the value of the base currency obviously also affects this relationship. Thus, in the same example, if the dollar now increases its value, then the EUR / USD will fall as they now need fewer dollars to buy one euro. And if the value of the dollar falls, then the price of Currency Trading EUR / USD will rise, because you will need more dollars to equal one euro.
Therefore, we can say that the value of each currency pair goes up and down in proportion to the rise and fall in the value of its currency base. Likewise, the same currency pair also moves up or down inversely with the ups and downs of the value of the base currency.
The Euro is the dominant currency basis against all world currencies. As a result, Currency Trading against the EUR will be identified as EUR / USD, EUR / GBP, EUR / CHF, EUR / JPY, EUR / CAD, etc., all pairs have the EUR acronym as the first in the sequence.
The British Pound is next in the domain hierarchy currencies. Currency Trading major currencies against the pound sterling may be identified as GBP / USD, GBP / CHF, GBP / JPY, GBP / CAD, etc. With the exception of the EUR / GBP, GBP usually is the first currency in a currency pair.
The USD is the next dominant base currency forex. The USD / CAD, USD / JPY, USD / CHF would be the main Currency Trading normal. Since the EUR and the GBP are more dominant in terms of base currencies, the dollar is quoted as EUR / USD and GBP / USD.
Knowing the base currency is important as it determines the value of another currency traded in the forex market. For example, if a trader expects the US economy it develops gradually, and that the value of the dollar to rise together, then they might want to sell the EUR / USD, because in this scenario the pair will probably lower its price. If the operator believes that the European economy will grow, and this will increase the value of the euro, he instead buy the EUR / USD.
The counter currency or secondary currency is the second currency in a Currency Trading.
The value of currencies
The base currency is always equal to the Currency Trading currency involved (ie, 1 Euro, 1 Pound, and 1 Dollar). When an investor buys 100,000 EUR / USD, it is said to be buying the euro or the base currency and sell or pay USD or counter currency. The amount of the base currency buying is equal to 100,000 Euros. Note that this is true regardless of the exchange rate at that time. The base remains in constant currency amount.
One of the key factors that influences the value of a particular Currency Trading, is the interest rate the central bank of a particular country charges for the use of their money. These interest rates are constantly changing, so it is advisable to follow it up.
For example, if the Federal Reserve in the United States (commonly known as the Fed) lowers its interest rate, generally also it falls the dollar, raising the price of EUR / USD. If the Fed raises interest rates, generally also it raises the dollar, lowering the price of Currency Trading EUR / USD.
On the other hand, the equivalent amount of the currency against which the investor is selling (or paying), will fluctuate with the exchange rate of Currency Trading. Which it is equal to: Number of the base currency x Market Foreign Exchange.
Since the Counter Currency is the part of the currency pair that fluctuates higher or lower, and determines the strength or weakness of both currencies in Currency Trading. When a currency rises, the other low.