Like various other equity markets, foreign currency exchange market also help generates money but still it is way more different than them. There are numerous technical strategies and terminologies that a trader should be aware of so that he or she can successfully deal while doing currency exchange.
Presently, in the foreign currency exchange market, the commodity is traded with foreign currency. These foreign currencies are every time priced in pairs.
The value of one unit of a foreign currency is always articulated in terms of another foreign currency.
Therefore all the trades integrate the acquisition and sale of two foreign currencies at the same time. You have to purchase a currency only when you expect the value of that currency to increase in the future.
When it increases in value, you have to purchase the currencies you have bought to make your profit. When you sell or buy foreign currency online, at that time the trade is called open trade or in open position and can be locked only when you sell or buy an equivalent amount of currency.
You even need to understand and bear in mind that how the currencies are quoted in the currency exchange market. They are always quoted in pairs as USD/JPY.
The very first currency the base currency and the second one is the quote currency.
The quote value hinge on on the currency conversion rates between the two currencies under deliberation. Most of the USD is used as based currency but occasionally euro, pound sterling is also used.
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The reward of the broker relays on the bid and the ask price. The bid is the cost of the broker, who is ready to pay to purchase base currency for exchanging the quote currency and ASK is the price the broker is ready to sell the base currency for exchanging the quote currency.
The variance between these two prices is called the blowout which determines the profit or loss of the trade.