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2 important things to know about forex trading

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It is very important to understand how the currency price works and what a pip is. The price of one currency in terms of another is divided to: the “direct” quotation” and “indirect” quotation.


The indirect quotation is the opposite of the direct quotation. A direct quotation of the South African rand against the US dollar would be USD/ZAR 6.8000. and it means that you can buy or sell one US dollar for R6.80.

An indirect quotation of the South African rand against the US dollar would be ZAR/USD 0.1470 and it means that you can buy or sell one South African rand for $0.15.

 

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In order to recognize the way to quote a currency pair you will have to enter the correct trade.

 

You must bear in mind about that from time to time a market maker will quote the currency symbols indirectly, keeping the use of the direct quotation’s price or vice versa. 

For example, ZAR/USD 6.8000. You should be aware which currency is weaker and you’ll discover that if you are buying or selling dollars or rands for 6.8000. You need to learn the right way to how to raise money.

 



A pip is a negligible change of a forex price. So, in forex trading, if the EUR/ZAR bid quote is 9.8000 and it moves up 3 pips, it will be quoted at 9.8003. With the price increase the base currency is increasing, too, and the quote currency is deteriorating.

See all 8 articles in category Forex

 
 
 
 
 
 
 
 

 
 

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