Quoting Conventions In Currency Trading
In the currency trading market, currency trading is always done in pairs. Also, all trades are the result of the simultaneous buying of one currency and the selling of another currency. The “basis” for the buy or the sell is called the base currency. If it helps, you can think of the currency pair as an instrument that can be bought or sold.
The first currency in your currency pair is known as the base currency. The second currency can be called either the counter currency or the quote currency. The U.S. Dollar is the world’s dominant currency and is normally thought of as the base currency for quotes. This includes USD/JPY, USD/CHF, and USD/CAD. The exceptions to this rule are the Euro, the Great Britain pound, and the Australian dollar. Just like all other financial products, currency trading quotes include a “bid” and “ask.”
A bid is the price that a trader is willing to buy the base currency in exchange for the quote currency. The "ask" is the price that the trader will sell the base currency in exchange for the quote currency. The difference between the bidding and the asking price is known as the spread.
Now that you know how to quote conventions in trading currency, you have a good idea of how to begin trading. If you play the game right, you can make yourself a tidy little profit. If you do this over a period of time, you can build up a nice little nest egg for yourself.
