Today’s Marketplace

What Every Currency Investor Should Know
The forex market is one of the most popular markets for speculation due to its enormous size, liquidity, and tendency for currencies to move in strong trends. An enticing aspect of trading currencies is the high degree of leverage available. Without proper risk management, this high degree of leverage can lead to enormous swings between profit and loss. Knowing that even seasoned traders suffer losses, speculation in the forex market should only be conducted with risk capital funds that if lost will not significantly affect one’s personal financial well being.
Most Commonly Traded Currencies (the “Majors”):
US Dollar (USD)
Japanese Yen (JPY)
Euro (EUR)
British Pound (GBP)
Canadian Dollar (CAD)
Australian Dollar (AUD)
Swiss Franc (CHF)

Commonly Traded Currency Pairs:
US Dollar and the Japanese Yen (USD/JPY)
Euro and US Dollar (EUR/USD)
US Dollar and Swiss franc (USD/CHF)
British Pound and US Dollar (GBP/USD)

When quoting currency pairs, the first currency is referred to as the base currency and the second, the counter or quote currency. The base currency is always equal to 1 monetary unit of exchange, for example, 1 Dollar, 1 Pound, 1 Euro. The dominant base currencies are, in order of frequency, the EUR, GBP, and USD. When a currency is quoted against the US Dollar it is called a direct rate. Any currency not against the US Dollar is referred to as a cross rate.

The quote currency is translated into a certain number of units of the base currency. For example, a quote of USD/JPY at 1.20, says that for every 1 US Dollar, you get 1.20 Japanese Yen, while a quote for AUD/JPY of 67.73 says that for every 1 Australian Dollar, you get 67.73 Yen.

Currency pairs are generally traded as 100,000 units of the base currency. For example, if you were buying EUR/USD at .97 you would be paying Dollars for Euros as follows:
100,000 x .97 = $97,000 for 100,000 Euros

Dominant Base Currencies
Euro - EUR/USD, EUR/GBP, EUR/CHF, EUR/JPY, EUR/CAD
British Pound - GBP/USD, GBP/CHF, GBP/JPY, GBP/CAD
US Dollar - USD/CAD, USD/JPY, USD/CHF

G.C.C. & Local Currencies