In the forex market, you buy or sell currencies. Placing a trade in the foreign exchange market is simple. The objective of forex trading is to exchange forex Trading Broker currency for another in the expectation that the price will change. More specifically, that the currency you bought will increase in value compared to the one you sold.
Two weeks later, you exchange your 10,000 euros back into U. An exchange rate is simply the ratio of one currency valued against another currency. CHF exchange rate indicates how many U. Swiss franc, or how many Swiss francs you need to buy one U.
The reason they are quoted in pairs is because, in every foreign exchange transaction, you are simultaneously buying one currency and selling another. Here is an example of a foreign exchange rate for the British pound versus the U. When buying, the exchange rate tells you how much you have to pay in units of the quote currency to buy ONE unit of the base currency. In the example above, you have to pay 1.
When selling, the exchange rate tells you how many units of the quote currency you get for selling ONE unit of the base currency. In the example above, you will receive 1. USD this simply means that you are buying the base currency and simultaneously selling the quote currency. First, you should determine whether you want to buy or sell.
The Bid, Ask and Spread All forex quotes are quoted with two prices: the bid and ask. In general, the bid is lower than the ask price. The bid is the price at which your broker is willing to buy the base currency in exchange for the quote currency. If you want to sell something, the broker will buy it from you at the bid price. The ask is the price at which your broker will sell the base currency in exchange for the quote currency. This means the ask price is the best available price at which you will buy from the market.