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Currency Prices
By Admin Forex Gnomebilt | October 11, 2009
Currency Prices
As we already explained in the previous section, the Forex trading aim is to purchase a certain currency with a low price and then selling it to a higher price than getting a profit by the difference of the prices.
Every single currency is identified with an alphabetical code, composed of three letters: the Euro is pointed at with the abbreviation EUR, the Japanese Yen is indicated with the abbreviation JPY, and so on. Another very important thing to be known is the way in which the prices of those currency are shown. The most prices are usually expressed with a sequence of 5 numbers. As an example we could use the currency pair involving Euro and American Dollar (EUR/USD). In the price shown is
EUR/USD=1.5467, it means that every Euro is worth $1.5467.
Of course, the prices do not keep steady in the progress of events and time, but they are influenced by the continuous market fluctuations bound to several and various factors. When it happens, the prices could vary in the following way: for instance EUR/USD may turn from 1.5467 to 1.5487 and this means that there was a ‘currency appreciation’. In the same time the price could change from 1.5467 to 1.5457 and this means that there was a ‘currency depreciation’. In the first case we gave the price value got an increase of 20 pip, while in the second one there was a price value decrease of 10 pip.
The ‘pip’ is known as ‘tick’ in the stock market and it is used to point the decrease and the increase of the lowest possible exchange rate. If we had to explain more precisely what pip is we should say that a pip is the smallest change of value in any Foreign Currency. The currency quotes are displayed as numbers with four decimal places and if the Foreign Currency moves up or down, the smallest changing is called a ‘pip’. In Forex trading the ‘pips’ are monitored to convey the investments in the right direction. Usually we call ‘ticks’ the smallest period of time existing between two trading moments. This time period could last a second or for the major currencies, while could be a period of hours for the less important currencies. ‘Ticks’ are not regular as the other market fluctuations, even though the charts are very often revised and renovated..
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