jimmec

Hey, I love the intentions of this post, because for the longest time, I never understood what exactly my trades were doing, relying on the trading platform to tell if I'm profiting or not. And that works fine until you start trading real money; can't just blindly trust the system anymore. Unfortunately, the explanations here are really confusing, and not directly applicable Forex trading. Additionally I believe there are a few inaccuracies. So in the interest of proper enlightenment (and to help me remember), let's address these one by one: Using the relevant terminologies, a trader going long on a given currency pair will be buying units of the BASE currency, paying in units of the QUOTE currency. One long contract says that we are buying one lot of the base currency, such that an increase in value (appreciation) of the base currency is the desired profitable outcome and is thus reflected in the rise of the quote. (eg. going from 1.2 to 1.21) ----------------------------------------------------- The convention for listing currency pairs is this: BASE/QUOTE. So to rephrase the original example in trader terminology, we would be trading the CAD/USD (although I believe this pair will always be quoted as USD/CAD in real life as USD has precedence over CAD for historical reasons) which currently is quoted at 0.9091(=1/1.1, because the quote always tells you how many units of QUOTE currency is needed to buy 1 unit of the base). The act of buying CAD here is then going long. Intuitively, the quoted rate going up on a long trade results in profit. And that follows here since after purchase, the quote changes to 1, from 0.9091. -------------------------------------------------- This is not true, since there are brokers offering cross pairs for trade. Eg. EUR/GBP. I basically regurgitated the Wikipedia page here. Hopefully in a more digestible manner. :doh: