How to read a forex quote

 How to read a forex quote

 It is challenging to any new forex trader to read and understand the forex quote, understanding the currency quotations and how they work in the currency pair trade.

  reading currency quotation is done through what is called currency pairing, when a  currency is quoted ., it  is done in comparison to another  currency , for example, when quoting   US dollar and  Nigerian naira: USD/NGN=150, meaning when you  divide $1 by  N1  you will get 150 unit and one  USD is 150 times higher than a NGN, that means  US$1 will buy NG N150,  when  a currency is quoted like this USD/NGN; the left currency is called the base currency , the slash then the quote currency., the currency value used above is just for simplicity but the actual  quote may be different.

 There two ways of quoting a currency:

·         the direct currency quote: when you consider your domestic currency as the base currency while foreign currency as the quote, for example when you from Nigeria and you are trying to buy the united state dollar, your currency quote should look like this NGN/USD where NGN is your base currency while USD is your quote currency, here the base currency will remain fixed at one unit while the quoted which is USD will be variable.  Therefore your currency pairing would look like NGN/USD = 0.0067.

·         indirect  currency quoting is when  you consider the foreign currency as your base currency while your domestic  currency as the quoted currency, for example  if you are from Nigeria and decided to buy the united states dollar,  then your currency quote should look like this;  USD/NGN, where the USD is your base currency and   NGN is your quoted currency, therefore  in indirect quoting, the base currency which is foreign currency, the American USD  remain fixed at one unit while the quote, your domestic currency which is the Nigerian naira , NGN is variable, your new currency quote should look like USD/NGN =150, the inverse of the direct quote.

 most currency are quoted using the  USD,  for example  USD/JPY, USD/NGN, USD/CD etc , this is why the united states dollar is called the major currency, currency can be quoted against  other currency  and this is called cross currency for example , EUR/GBP, EUR/JPY,JPY/NGN etc.  This cross currency expand the trading possibilities but it is only that trading in cross currency has low volume than the using the major currency.

 in forex trading there is a bid price and an ask price:  bid price is the price  used when selling a currency and this tell how the quoted currency is to be obtained  to get the base currency, for example with USD/NGN, it tells how much  the Nigerian naira to be given to get the US dollar.   while the ask price refer to the amount  the quoted currency has to be  paid to obtained the base currency , for example with our USD/NGN , it means how much the USD  to be given to get one Nigerian naira.  Let’s look at an example USD/NGN= 1/150, here the bid price is $1 while the ask price is N150.

What is forex trading?

What is forex trading?

 The term forex stands for foreign exchange, forex is the trading in currency, it is the exchange of currency for another currency, and forex involve the buying of a currency while at the same time selling another currency.  People buy and sell currency because of the different part of the world we live, therefore currency values get appreciation and depression at the same time due to different factors ranges from economical to geopolitical reasons. It is from this trend that forex traders make their money.  Forex market has no physical market or location like capital market (the stock exchange) or financial market (the banks), it is traded online and 24 from Sunday night to Friday night through a global network of businesses. Currency prices are constantly changing, increasing and decreasing against each other and this makes the market interesting to traders.

 Forex market trade for 24hrs trading throughout Monday to Friday starting from wellington, New Zealand, progressing through Asia trade through Tokyo and Singapore and closing in London at network Friday night. The wide range of trading makes currency price variation less.

 Forex trading is margined product; you need to invest small   percentage of your position to profit from foreign exchange market.

 The fact that we need to exchange currency is what brought about forex trading, for example an American with US dollar has to change to Nigerian naira or Saudi riyal to buy crude oil or an Arabian man with dirham has to change it to euro to buy technology from Germany. This is why forex trading is the largest and most liquid money market in the world, forex trading started since when international trade started. Forex market is the largest financial market, it outweighed  stock market, it was reported that in 2012 by bank for settlement that it market volume  passes $5 trillion , one thing special about forex is that, it has no any central market place instead it is traded online via software.

There are basically three types of forex market that traders can trade in the market; they are spot market, forward market and the future market.

Forward market an over- the-counter market place that set price for financial commodities for future delivery.

 The spot market also called the cash market; it is a public market where currencies are traded for immediate delivery. In spot market currency are bought and sold instantly at that current price.

 In spot market delivery is done in three days, transaction day plus two working days. , spot market is organized market that can operate where ever the infrastructures for transaction exist.

 Future market:  it is forex market where transaction are offered but meant to be delivered in the future date. Traders in future market buy and sell financial commodities for delivery on future date.

 There is numerous ways to refer to forex, it can be called the currency market, FX market, forex market or the foreign exchange market, they are synonymous and almost mean same thing

THE FOLLOWING ARE THE VARIOUS CURRENCIES AND THEIR DAILY EXCHANGE RATE

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Live Currency Rates

 Exchange rates

Exchange rate is the rate at which one currency is exchange with another, it could also mean the value of one’s country currency in terms of another countries currency, for example, in commercial banks NGN200 is exchange for one unit of us dollar, and it means US$1 is equivalent to NGN200.  Exchange rate is determined in foreign exchange market. The foreign exchange market otherwise known as forex market is opened 24hrs a day and all days except the weekends,

 We have two type of exchange rate the spot exchange rate and the forward exchange rate. The exchange rate that is quoted and traded at that same business day is called the spot exchange rate while an exchange rate quoted and meant to be traded in a future date is known as a forward exchange rate, the spot exchange rate is the exchange rate we normally see in our commercial banks, quoted on forex calendar etc this exchange rate are what determine a country currency value and rate use by travelers who wish to trade in foreign currency. But the forward exchange rate is in form of future contract, conducted by two persons upon an agreed exchange rate in future. Forward exchange rates are mostly done by hedgers, and entrepreneurs who try to dodge the uncertainty in the currency they intend to trade in the future.

 Forex speculators make money by predicting loss on a currency they trade against, if they currency exchange rate get depreciated, forex speculators make their money away, otherwise they lose money.

 Currency value also fluctuate in the foreign exchange market, it get appreciated when the demand for it is higher than its supply, but when its supply is higher than its demand than it get devaluated, this is why two currency exchange rate fluctuate,

Exchange rate is the purchasing power of any currency, the higher the exchange the greater the purchasing power of the currency and the lower the exchange rate the  weaker the  purchasing power of the currency, the real exchange rate  is the purchasing power of one currency in respect to another currency at the given exchange rate and market prices. It is the unit of a country’s currency to buy a kilogram of goods in another country at a given exchange rate and market prices.  For example the   number of units of us dollar that can buy a  kilogram of meat in Nigerian   market is the exchange rate of the   US dollar to naira or the number of unit of Nigerian naira that can buy a kilogram of meat in a US market is the exchange rate of the  naira to  US dollar.

 Many country use to manipulate their currency value to keep it at lower value, this give the country an edge in the foreign exchange market, but a country that import should have a higher exchange rate this is to decrease the price (actual market value) of the imported goods whereas a country that export should have a lower exchange rate this meant to give its product higher market value