The currency that you are purchasing is called quote currency. In forex trading, you sell one currency to purchase another. The exchange rate tells you how much you have to spend in quote currency to purchase base currency. A long position means that you want to buy the base currency and sell the quote currency. In our example above, you would want to sell U. A short position means that you want to buy quote currency and sell base currency. In other words, you would sell British pounds and purchase U.
The bid price is the price at which your broker is willing to buy base currency in exchange for quote currency. The bid is the best price at which you are willing to sell your quote currency on the market. The ask price, or the offer price, is the price at which your broker will sell base currency in exchange for quote currency. The ask price is the best available price at which you are willing to buy from the market. A spread is the difference between the bid price and the ask price. You’ll see two numbers on a forex quote: the bid price on the left and the ask price on the right.
Decide what currency you want to buy and sell. If you believe that the U. Look at a country’s trading position. If a country has many goods that are in demand, then the country will likely export many goods to make money. This trading advantage will boost the country’s economy, thus boosting the value of its currency.
If a country is having an election, then the country’s currency will appreciate if the winner of the election has a fiscally responsible agenda. Also, if the government of a country loosens regulations for economic growth, the currency is likely to increase in value. Reports on a country’s GDP, for instance, or reports about other economic factors like employment and inflation, will have an effect on the value of the country’s currency. A pip measures the change in value between two currencies.
0001 of a change in value. 547, your currency value has increased by ten pips. Multiply the number of pips that your account has changed by the exchange rate. This calculation will tell you how much your account has increased or decreased in value. Experience indicates that the company knows what it’s doing and knows how to take care of clients. Check to see that the brokerage is regulated by a major oversight body. If your broker voluntarily submits to government oversight, then you can feel reassured about your broker’s honesty and transparency.
See how many products the broker offers. If the broker also trades securities and commodities, for instance, then you know that the broker has a bigger client base and a wider business reach. Sometimes unscrupulous brokers will go into review sites and write reviews to boost their own reputations. Reviews can give you a flavor for a broker, but you should always take them with a grain of salt. It should look professional, and links should be active. If the website says something like “Coming Soon! Check on transaction costs for each trade.