Currency Transaction Basics

Currency Transaction Basics Video Clips. Duration : 2.07 Mins.

In this video you'll learn the basic concepts involved in a forex transaction. What actually happens when you buy or sell a currency pair? Why do rates increase or decrease? How can you trade forex? Watch this video to find out. Forex transactions involve two currencies -- one currency is purchased while the other is sold. Consider the euro dollar currency pair. If you bought this pair, you would be buying Euros and selling dollars. If you sold this pair, you would be selling euros and buying dollars. As more traders buy the EUR/USD pair, the value of the euro strengthens relative to the dollar and the exchange rate increases. Likewise, when more traders sell the EUR/USD, the value of the euro weakens relative to the dollar and the exchange rate decreases. Traders attempt to predict future exchange rate movements, in order to profit as the exchange rate moves in their favor. Let's look at an example. At this time, the EUR/USD currency pair is trading at 1.4088. If a trader anticipates that the exchange rate will increase, they can buy the euro dollar pair. If the rate increases, the trader can close his pair by selling back the euro dollar pair at a higher price, making a profit. In this case, a profit of three pips. (PAUSE) However, if the trader had bought the pair at 1.4088 but closed his trade at a lower price, the trader would make a loss, in this case, a loss of three pips. Let's look at an example. At this time, the EUR/USD currency pair is trading at 1.4088. If a ...

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Posted in: Basics,Currency,Transaction