currency are quoted in pairs such as EUR/USD and include both a bid and ask price. The bid price is always lower than the ask price.The first listed currency in the pair or the one to the left of the slash is called the base currency and the second currency or the one to the right of the slash is called the quote currency. In our example above the EUR is the base currency and the USD is the quote currency.
The bid price for each currency pair is the price which the dealer is willing to buy the base currency in exchange for the quote currency. This means the bid is the price which you will receive when you sell the currency pair. The ask price for each currency pair is the price which the dealer will sell the base currency in exchange for the quote currency. This means the ask price is the price you will pay when you buy the currency
.The difference between the bid and ask price is commonly referred to as the spread.
A Forex
trading technique known as fundamental analysis is used to help you determine whether you should buy or sell a specific currency pair. Using the EUR/USD example above, if you belief that the US economy is weaken which causes the dollar to go down in value, you would want to place a Buy EUR/USD order with your Forex broker. By placing this trade, you belief the euro will rise in comparison to the US dollar. If you belief the US economy is strong and the euro will weaken, then you would want to place a Sell EUR/USD order. This means that you anticipate the euro going down in comparison to the US dollar.
