A Euro is said to be getting Stronger than a Dollar, if for example the quotation moves from EUR/USD 1.3500 to say EUR/USD 1.3510. The reverse happens when the quote EUR/USD moves from 1.3400 to 1.3390. This is the case with regard to any Currency Pair. The Trader makes a profit when there is an increase in the Currency Pair price, provided he is with a long position (buying the 1st currency against the 2nd one) and he suffers from a loss if he is with the short position (selling the 1st currency against the 2nd currency).
The Exchange Rate in Forex Trading shows price movements. The smallest measure of such movements is called the Percentage In Point (pip). All currency pairs generally show a pip of 0.0001 except the USD/JPY pair, which shows a pip of 0.01.
The Ask price can be defined as the price at which a Broker sells the currency price and the Trader buys one. The Bid price is defined as the price at which the Broker buys a currency pair and the Trader sells one.
A Spread equals the difference between the Ask price and the Bid price that is expressed in pip terms. When a currency pair does not include the USD or the EUR, it is called a cross rate currency pair. When the EUR is included in a pair it is specifically called Euro crosses.
A Trader needs to deposit a certain amount during any kind of transaction. Leverage is the ratio between contract value and deposit. The initial investment, called Margin, covers the credit risk of the broker, while opening a position. The percentage margin requirement equals the inverse of the leverage value.
The Majors, defined as the most liquid and internationally traded currency pair, are an integral part of the Forex Trading, accounting for its 90%. The most important currency pairs are the EUR/USD ranking 1st, USD/JPY ranking 2nd, GBP/USD ranking 3rd and lastly EUR/JPY ranking 4th among all the actively traded currency pairs.
The Forex and Contract for Difference Trading involves a high level of risk to your capital investments. This makes it possible for you to lose out on money and hence prove to be unsuitable for certain traders. You should thus seek advice from people who are already into this and carefully go through all Risk Warning Notices.
