Anyone can join the trading industry. Having easy access to the online trading world doesn’t mean you will do well in the investment business. To become good at trading, you need to know a lot about the market. Since you will be dealing with the currency pairs in the Forex market, you must learn about the critical factors that help you make a profit in currency pair trading.
In this article, we are going to give you a brief idea about the currency pairs so you can understand how retail traders make a profit by trading the different assets. Let’s get into the details.
Here, the Euro is the base currency. If you believe that the exchange rate of the USA dollar will fall, you are like to make a buy, that is, you are likely to buy more Euros at a lower rate in order to make a profit when the dollar value increases.
In the opposite scenario, you make a sale. When you believe the Euro is weak and it will fall in price versus the US dollar, you are likely to sell Euros in the Forex market to limit your losses.
The same principle applies to this currency pair. When you think your quote currency is weak, in this case the Japanese Yen, you expect that it will fall in value. Thus, you will buy the pair to sell the US dollars at a higher exchange rate than the Yen.
You will sell the pair when the Base currency is strong because you think that Japanese Yen could lose value in the market. So, you sell the pair to make money than lose it.
After all these major currencies pair, you probably have experienced the pair of GBP/USD. You are planning to make a buy order, when the US dollar value is weak, to buy Britain Pound. You make the buy to make money in exchange because you believe that the value of USD will rise again.
If you are thinking this, you are correct.
What will be the scenario if the GBP is strong? You will sell the currency pair to make money, because you believe the USD will fall in value over time. Once you find such conditions in the market, you can use the Forex trading software and make a decent profit by trading the asset.
Here, we will not explain like the other major currency pair. Use your understanding and try to find us the answer. We have answered for your sake.
If the Swiss currency is weak, you will buy more US dollars to make a profit by selling it at a higher exchange rate.
If the US currency is weak, you will sell the dollars to make money before the USD loses value. In short, just remember these tips.
Base Currency Strong = Sell because it might fall and you might lose money.
Quote Currency Weak = Buy because it will give you a cheaper rate to buy the base currency and sell it at a higher rate.
Marginal means a small increment in value. Marginal trading gives us the unique opportunity to make money with our little account. If you are new to this market, you may think of this as leverage. However, while using the leverage, you should be extremely cautious about your trade execution process and take your trades with very low risk. Never think that by using the high leverage trading account you can make big profit and change your life.
Forex is not just the trading of one single currency. It is the trading of different currencies. Different currencies have different interest rates. When you keep a trade open for more than 24 hours, the brokers usually charge rollover fees. Before you take the trades, you need to learn about the rollover fees by accessing the broker website. By doing so, you can optimize your trading costs to a great extent.