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A currency pair is the quotation of the relative value of a currency unit against the unit of another currency in the foreign exchange market. The currency that is used as the reference is called the counter currency , quote currency, or currency [ 1 ] and the currency that is quoted in relation is called the base currency or transaction currency.
Currency trading happens continuously throughout the day; as the Asian trading session ends, the European session begins, followed by the North American session and then back to the Asian session. Fluctuations in exchange rates are usually caused by actual monetary flows as well as by expectations of changes in monetary flows.
Retail foreign exchange trading is a small segment of the larger foreign exchange market where individuals speculate on the exchange rate between different currencies. This segment has developed with the advent of dedicated electronic trading platforms and the internet, which allows individuals to access the global currency markets.
The key currency generally refers to a world currency, which is widely used for pricing, settlement, reserve currency, freely convertible, and internationally accepted currency. Cross rate: After the basic exchange rate is worked out, the exchange rate of the local currency against other foreign currencies can be calculated through the basic ...
A foreign exchange spot transaction, also known as FX spot, is an agreement between two parties to buy one currency against selling another currency at an agreed price for settlement on the spot date. The exchange rate at which the transaction is done is called the spot exchange rate.
The number of days will depend on the option agreement, the currency pair and the banking hours of the underlying currencies. The convention helps the counterparties to understand when payments will be made for each trade. For the convention, there are four key dates to consider when trading a particular currency pair:
A synthetic currency pair allows one to reduce the spread costs of trading. [4] Crosses create more opportunities for traders by giving them more currencies to trade. [5] Typically, trends and ranges are cleaner on currency crosses than they are on the major currency pairs. Trading crosses allows you to take advantage of differences in interest ...
The value of a pip depends on the currency pair, the exchange rate, and the size of your trade position (usually measured in lots). [5] If the U.S. dollar is the quote currency(the second of the pair),such as with the EUR/USD pair, the pip is fixed at .0001. In this case, the value of one pip is calculated by multiplying the lot size by 0.0001.
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