Forex Market: Currency Pairs and Forex Quotes

If you are new to the forex market, you might find forex quotes confusing. Do not allow yourself to be overwhelmed with forex quotes. In fact, reading forex quotes can be quite easy.

In reading forex quotes or currency pairs, there are two important things that you must keep in mind. First is that the currency being quoted first is what we refer to as the base currency. Second is that the value of base currency always equals to 1.

The centrepiece or focus of the forex market is the US Dollar. It is also often quoted as the base currency for a lot of pairs. A currency pair that has the US Dollar as the base currency is what we call “major”. Examples of major currency pairs are USD/JPY, USD/CAD, and USD/CHF. In major currency pairs, quoted currencies are expressed as the US Dollar, specifically, one (1) US Dollar for every, or a fraction of the, unit of the second currency quoted in the pair.

As an example, let us take the US Dollar and the Swiss Franc. In the currency pair USD/CHF, the base currency is the US Dollar. In the quote USD/CHF = 1.0806, one unit of the US Dollar is equivalent to 1.0806 units of Swiss Francs.

If a currency goes up, you must take note of the base currency. In the aforementioned pair, the US Dollar is the base currency. If the quote goes up, it simply means the value of the US Dollar has increased compared with the value of the Swiss Franc. If the quote goes down, then one can easily conclude that the value of the US Dollar has depreciated to a certain degree.

There are cases when the US Dollar is not the base currency. We often see the US Dollar as the quoted currency when it is paired with the Australian Dollar (AUD), British Pound (GBP), and Euro (EUR). Let us take the AUD/USD currency pair quoted at 0.8044. This shows that one unit of Australian Dollar is equivalent to 0.8044 or less than one unit of US Dollar. One can conclude that the Australian Dollar is weaker than the US Dollar. If the quote goes up, then it means that the US Dollar has weakened against the Australian Dollar.

Currency pairs do not always involve the US Dollar. These currency pairs are referred to as cross currencies. Examples of which are EUR/AUD, EUR/JPY, CHF/JPY, and EUR/SGD. Let us take the currency EUR/SGD pair quoted at 2.0373. This shows that one unit of Euro is equivalent to more than two units of Singapore Dollar or 2.0373 Singapore dollars.

Source: Bart Icles

Reduced Minimum Trade Size for Many FX Crosses

From Monday 16 March, we will be reducing the minimum trade size for many FX crosses.

The minimum trade size will be reduced for the currency crosses listed below. For all other currency pairs the minimum trade size will remain as it is now.

• Minimum Trade Size reduced from 500,000 to 100,000:

JPYNOK

• Minimum Trade Size reduced from 50,000 to 10,000:

SEKDKK

• Minimum Trade Size reduced from 5,000 to 1,000.

Diversify your investment with FX Options

Forex Options trading is a more advanced type of currency trading available with a Tricom Trader online trading account. FX Options can be used to facilitate a number of trading strategies on a medium to long-term investment timeline.  They also offer an excellent opportunity for hedging spot positions. Forex Options are available for currency crosses, and Gold and Silver against the US dollar.

Tricom Trader offers Over the Counter (OTC) plain vanilla European style Forex Options in well over 30 major currency crosses, all through our online trading platforms.

Benefits of trading FX Options with Tricom Trader:

• Forex Options for 34 currency pairs
• Low margin requirements with professional netting calculations for hedging spot positions
• Option trading on live streaming price quotes, all with no dealer intervention
• Option expiries from short dated to one year
• Gold and Silver Options
• Automatic exercise of Options on expiry.

The majority of vanilla Options can be executed directly on live price quotes without dealer intervention. For other Options – including exotic currencies and multiple leg Options, the platform offers good price indications with trades quoted by a dealer on request.

What are FX Options?

A Forex Option gives an investor the right, but not the obligation, to either buy (Call Option) or sell (Put Option) a certain currency pair at a specified price (known as the strike) on a specified date (the expiry date). For this right to buy or sell the underlying asset, a premium is paid upfront to the seller of the Option. Whether one chooses to exercise this right is dependent upon the market conditions at the time of Option expiry. Trading Forex Options makes it possible to profit when a currency pair moves higher or lower.

A Tricom online trading account is a valuable tool for the professional FX trader. Our suite of trading platforms support online trading of FX Spot, Options and Forward Outrights. For the FX Options trader, Tricom is one of the only online providers that facilitates Options trading on live prices.

Forex Options on Tricom Trader

Tricom Trader offers Forex options in 34 major currency crosses with 9 majorcrosses traded on live price quotes.

Forex options on Tricom Trader are European style vanilla options. European options may be exercised only at the expiry date of the option and “Vanilla options” are simple options, which have a single strike price and standard expiration date.

Strike Price is the price at which the currency cross underlying the option can be bought (call) or sold (put) when the option expires. The specified strike price (as well as option duration and market volatility, etc.) affect the price of the option contract.

Why Trade Forex Options

You can limit your risks (maximum potential loss is the premium if you are the buyer) and you will still have unlimited profit potential.

Options require less money up front than if, for example, you take a regular spot position. This is because you don’t buy the asset itself but only a contract that gives you the right to either buy or sell the asset at a given price.Therefore, if you are the buyer, you will only have to pay the premium upfront. On the other hand, if you are the seller of an option, you receive the premium upfront, but then you have the possibility of an unlimited loss.

An option offers you some important hedging opportunities.

Options are traded OTC (over-the-counter), which essentially means that you decide the strike price, the exercise date and the currency pairs involved in the option contract.

How to Read a Forex Chart

The forex chart is among the most essential tools in a forex trader’s arsenal. Simply put, it is a graph of a particular currency pair’s performance over a given period of time. Reading forex charts is key to a trader’s business, so it’s important to know how to read them and understand what they mean.

Every forex chart will be labeled with a currency pair: EUR/USD, USD/GBP, etc. Remember, all forex trading deals with different countries’ currency in relation to each other. The EUR/USD chart, for example, tells you how the euro and the U.S. dollar compare.

Along the bottom of the chart is the timeline – 15 minutes, an hour, a day, a week, or some other period. Going up the right-hand side are incremental amounts. For the EUR/USD chart, the amounts might be 1.2531 at the bottom, going up to 1.2561 at the top. And of course the middle of the chart shows what position the EUR/USD pair held at what time.

The forex chart is useful because it shows in clear terms how a currency pair is performing. You can see at a glance whether a currency is getting stronger or weaker, and you can act accordingly. Selecting the time frame helps you see very minor trends (in a 15-minute period, say) or more long-term ones (over the course of several days, as an example).

You can find forex charts all over the Internet, on Web sites for forex brokers, tutors, and on other forex-related sites. Those are acceptable for looking at trends now and then. But to be a serious trader, you need to have access to charts much more readily, without having to go to a Web site. Fortunately there is trading software that fills that gap by providing you forex charts. Being able to access the latest charts is key to successful trading.

With dozens of world currencies, there are far too many possible currency pairs for anyone to keep track of mentally. Forex charts show at a glance how currency pairs are performing, and good software helps you to store a selection of charts as “favorites.” You’ll want to keep an eye on the charts that represent investments you’ve already made, and it’s smart to have a few extra saved, too, so you can watch for trends in currencies you haven’t traded yet. You never know when a lucrative new opportunity is going to be revealed.