A currency is a mean of exchange, facilitating the transfer of goods and/or services. It is one form of money, where money is anything that serves as a medium of exchange, a store of value, and a standard of value. Currencies are the dominant medium of exchange. Coins and paper money are both forms of currency.A currency pair depicts a quotation of two different currencies on the Forex market. The first currency in the pair is the base currency or transaction currency. The second currency in the pair is labelled quote currency, payment currency or counter currency. Such a quotation shows how many units of the counter currency are needed to buy one unit of the base currency.
For example the quotation EUR/USD 1.2700 means that one euro is exchanged for 1.27 US dollar. If the quote moves from EUR/USD 1.2700 to EUR/USD 1.2710, the euro is getting stronger and the dollar weaker. On the other hand if the EUR/USD quote moves from 1.2700 to 1.2690 the euro is getting weaker while the US dollar is getting stronger.
Majors (main currency pairs traded on Forex) are the most liquid and widely traded currency pairs in the world. Trades involving majors make up about 90% of total Forex trading.
The Majors are: EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD and USD/CAD.
GBP/USD is the only currency pair with its own name. It is known as "Cable", which has its origins from the days when a cable under the Atlantic synchronized the GBP/USD rate between the London and New York markets. But there are also lots of abbreviations for other currency pairs such as: AUD/USD "Aussie", EUR/USD "Euro", GBP/JPY "Geppy", NZD/USD "Kiwi", USD/CAD "Loonie", USD/CHF "Swissy", USD/JPY "Gopher" and USD/CAD "Beaver".
The quotation of a currency pair usually consists of two prices. The lower price (bid) is the price at which a market maker or a brokerage in general is willing to buy the first currency of a pair. The higher price (offer or ask) is the price at which a brokerage is willing to sell the first currency of a pair. The spread is the difference between the two prices. For example if the quotation of EUR/USD is 1.3707/1.3709, then the spread is EUR 0.0002 (or 2 pips). In general, the more popular the pair is, the smaller the differences or spreads. Different brokerage firms have different spreads.
Currency correlation is a statistical measure of the strength and direction of a linear relationship between two diferent currency pairs. Currency correlation is computed as a correlation coefficient. In the broader sense, currency correlation can refer to the correlation between any currency pairs and the commodities, stocks and bonds markets.
A currency sign is a graphic symbol often used as a shorthand for a currency's name. Internationally, the ISO 4217 codes are used instead of currency signs, though currency signs may be in common use in their respective countries. Most currencies in the world have no specific symbol.
When writing currency amounts the location of the sign varies by currency. Many currencies, especially in Latin America and the English-speaking world, place it before the amount (e.g., £50.00); many others place it after the amount (e.g., 50.00 S₣); and, before they were forbidden, the sign for the Portuguese Escudo and the French Franc were placed in the decimal position (i.e., 50$00 or 12₣34). The standardized European default placement, used in absence of a national standard, is that (€) is placed before the amount. However, many Eurozone countries have sustained or generated alternative conventions.
The decimal separator can also take local countries' standards. For instance, the United Kingdom often uses a middle dot as the decimal point on price stickers (eg., '£5·52'), although not in print. A comma (eg. '5,00 €') is a common separator used in other countries. See decimal separator for information on international standards.
The earlier you get your “bad” lessons, the better for your overall experience. No mater how good you consider yourself prepared, after demo trading lessons, you have no idea of the forces ruling on the real market.
In fact the worst enemy you are going to face in the very beginning is not hiding behind the walls of the global currency trading centers. Your most dangerous foe is hiding deep inside of you. That enemy is so powerful that you will be amazed how quickly it will wash away all your carefully considered decision.
No one has been able to evade the force of that destructive power. No one can understand or realize that force unless it has been confronted face to face. Start trading with real money and you will face it too. Fear, Greed or Hope are some of the names of that power.
Fear forces you to sell near the bottom and buy near the top. Greed forces you to get out of the market prematurely. Hope will keep in the trade until you loose everything. Fear may save you but hope may wreck you completely. Greed will never make you rich.
It is easy to give advice to trade without emotions and use the logic, only. How you can achieve that if you never have been there. You need to go through that turmoil, pick up your loses due to your emotional decisions and than analyze.
Study all your “bad” trades, because they are the most precious gifts on the way to proficiency in trading. Growing as an experienced trader is possible only after getting your losses in the beginning. Then sit down and carefully study the lessons they brought to you.
One thing traders never want to do is to admit of being wrong. The market is a constantly changing and it demands flexibility in taking decision. That implies monitoring and constantly adjusting, changing your decision and action. When your logical analyzes suggest that you are wrong – get out, quickly.
Once you overcome the emotions, concentrate on developing your signature way of trading. You can start with following different advisors and system and picking from them the things you like. Demo trade and test your ideas until you find the trade system which is matching completely your personality.
Now, you have to go back to emotion in a controlled way. Every time your system suggests a trade look inside you and see how you feel about this trade. You feel bad – discard it. If you feel good – keep it.
Here comes the final step: Looking for the final approval sign before submitting the trade. Here is the time, where the mastership shows up. Your weapon is loaded, the target is clearly seen on the visor and the finger is on the trigger. You have to make that final exhale, get the target over the cross point and shoot it.
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