Currency pairs in forex trading. Why are you being taught FOREX BASICS and not the main TECHNICAL ANALYSIS for a start?
Well, when you’re building a house, you start from the foundation.
If you don’t build a solid foundation, when you get to the body of the house, everywhere will be shattered
You need to understand the basics of forex to make accurate calculations before risking any amount you want to risk.
WHAT IS A CURRENCY?
Whenever someone says “currency”, what should first come to your mind is MONEY. A currency is a system of money in general use in a particular country. This means every country has its currency.
USA has a Dollar (USD)
And Nigeria has Naira (NGN)
Great Britain has British Pound (GBP)
And South Africa has the South African Rand (Zar)
NOW WHAT IS A CURRENCY PAIR
A currency pair is the dyadic quotation of the relative value of a currency unit against the unit of another currency in the foreign exchange market.
It is a price quote of the exchange rate for two different currencies traded in FX markets. When an order is placed for a currency pair, the first listed currency or base currency is bought while the second listed currency in a currency pair or quote currency is sold
WHICH MEANS THAT FOR US TO HAVE A CURRENCY PAIR, TWO CURRENCIES MUST COME TOGETHER
JUST LIKE HOW WE SAY “PAIR OF SLIPPERS OR PAIR OF TROUSERS OR PAIR OF SHOES.
Examples of these currency pairs are
EURUSD – EURO vs USD
CADCHF – Canadian dollar vs Swiss Frank. You Sabi Canadian Loud, time don reach to also Sout abi Canadian Dollar 👀
GBPJPY – BRITISH POUND JAPANESE YEN
NOW LET US TALK ABOUT THE EXCHANGE RATE
You must’ve seen people posting “BUYING BULK BTC & USDT AT SWEET RATE” on their status.
And they call themselves CRYPTO EXCHANGE OR CRYPTO VENDORS
Have you ever asked yourself what they’re doing and how they do it?
They Buy Crypto coins at a low price and sell them off at a high price
That’s What EXCHANGE is all about.
What Is an Exchange Rate?
An exchange rate is the value of one nation’s currency versus the currency of another nation or economic zone. For example, how many U.S. dollars does it take to buy one euro? As of June 3, 2022, the exchange rate is 1.0721, meaning it takes $1.0721 to buy €1.
Let’s use our local currencies for these examples
Let’s say you need to travel to America and you need to convert air to a top dollar to be able to spend money over there.
And your budget for the travel is just about 1.8 million Naira
Naira to Dollar rate now is 600 naira for 1 dollar. So you convert a 1.8million Naira to dollars and that will give you about $3,000. Because 1,800,000 divided by 600 nairas is = 3,000.
When you get to the USA, then an old friend decides to sponsor your pay.
Things you have to know about Crypto And Best Market Offer
And by then the time you got back to Nigeria after some months or years, we had already elected a very poor-performing president who could’ve killed our economy by that time. You now come back and hear that Naira is now at 700/$
You start rejoicing because remember you didn’t touch your $3,000 because a friend sponsored your vacation. You now convert the $3k to naira at the rate of 700/$
Mathematically, 3000 x 700
That’s = 2,100,000
You make a gain of 300,000
Just because our currency devalued against the US dollar.
But don’t forget that it’s not really “GAIN” until our currency gets value because the price of goods and services will also increase.
If Naira had increased in value against the dollar and went down to 500 naira per 1 Dollar, you would’ve lost 300k also if you changed your $3k to Naira
It would now be 3,000 x 500/$ = 1,500,000
But then the price of goods would come down.
More details on the currency pairs will be uploaded shortly.