Unlike other markets, forex markets has the unique feature of open on all 24 hours a day through online forex trading. It is the most attractive liquid financial market with thousands and thousands of enthusiastic people across the globe participating in it. To understand the forex market it is very essential to know the currency trading basics very clearly.
In forex market currencies are transacted in pairs such as USD/GBP or USD/EUR. In the trade selling of one currency and buying of the other currency happens simultaneously. The currency, which is the basis for the trade, is known as base currency and the other one is counter currency. Typically in USD/EUR, USD is the base currency and EUR is the counter or terms currency. The important currency trading basics include how to read the quotes. Generally quotes are expressed as counter currency value to $1 USD. For e.g., USD/EUR quote 0.812 means that one USD equal to 0.812 EURO.
Two important terms in forex trade are BID and ASK Prices. As the terms indicate ‘bid’ is the price at which you can buy the counter currency by selling the base currency. Similarly ‘ask’ is the price at which you can sell the counter currency through buying the base currency. Spread is a commonly used word in the currency trading basics. It means the difference between the ‘bid’ and ‘ask’ prices. Many forex brokers are out there in the market offering commission free trading with spreads. Understanding the language and basics in the forex trade is very much essential for successful business in the forex currency market.