1. Getting to Know Foreign Exchange Trading
1.1 Introduction to Foreign Exchange Trading
Welcome!
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If you've ever traveled to another country and exchanged your money for another currency, you've participated in a small way in the foreign exchange market.
This market is a place where people and businesses from all over the world buy and sell different currencies, and it's open 24 hours a day, five days a week.
1.2 Understanding Currency Pairs
In foreign exchange trading, currencies are always traded in pairs.
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We deal with two currencies at once, similar to when you travel.
Let's say you're going from the UK to America. You have £ Pounds, but in America, you'll need $ Dollars.
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So, you exchange your Pounds for Dollars. The rate might be 1.28, meaning for every 1 pound, you get 1.28 US dollars.
Here, the Dollar is the "base currency", and the British Pound is the "quote currency".
If you think the Dollars's value will go up, you might exchange more Pounds for Dollars. This is like "buying" in trading.
If you think the Dollars's value will go down, you might exchange fewer Pounds, hoping for a better rate later. This is like "selling" in trading.
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So, "currency pairs" in trading are about deciding which currency will do better and making a trade based on that.
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You're essentially betting on whether the base currency will strengthen or weaken against the quote currency.
1.3 The Concept of Buying and Selling in Foreign Exchange Trading
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The basic idea here is similar to any other form of trading: you want to buy at a low price and sell at a high price.
If you think the base currency will increase in value compared to the quote currency, you buy the pair.
If you think it will decrease, you sell.
1.4 The Role of Brokers
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Brokers are like the shopkeepers of the foreign exchange market.
They provide the platform where you can make your trades.
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Our partner broker is called Blueberry Markets.
