Understanding forex and forex pairs
Forex trading online is one of the largest markets in the world that deals with the exchange of currencies. Even though you cannot find any physical buildings that represent the forex market, it still stands as the largest market because of the trading volume.
In forex trading online, you can exchange your currencies for the market value during the time of trading. The difference between the trading gives a profit or a loss to the trader. In most cases, the currencies are exchanged for their equivalent value in the form of another currency.
These types of trading mainly exist when any firm, company, or individual wants to exchange their currency with another country’s currency for business purposes. Currencies are mainly traded as pairs. The profit or loss for the trading depends on the currency values.
Whenever there is a good price movement, traders make a good profit from it. For example, imagine that an American company orders certain goods from Japan. So, during trading, the US dollar will be traded for the Japanese yen as pairs.
As mentioned above, forex trading online takes place in pairs. For example, USD/JPY which stands for US dollars versus the Japanese yen, EUR/USD, meaning the euro versus US dollars, USD/CAD, which means US dollars versus Canadian dollars, etc… Whenever trading takes place between the pairs, a price will be associated with them.
For example, if the price for USD/CAD is 1.2569, then it means that you will need 1.2569 CAD to buy one US dollar. If this price is increased, say, 1.3336, then you will need 1.3336 CAD to buy 1 USD. This means that the monetary value of USD has increased and the money value of CAD has decreased. It means the trader now requires more money to buy the USD through trading.