Forex market basic knowledge
Currency Pair: The share market rule is that any kinds of share price will be determined against that country’s currency. For example, the share price of our country is determined by our country’s currency.
But it is impossible to define the currency rate of a country in the Forex market like this. Only Dollar or Euro can have no value. For example, you can get 73rs against 1 dollar and 0.70 Euro or 0.093 Australian dollar against 1 USD dollar. If we talk about Japanese Yen, you can get 80 yen against 1 dollar. So what is the real price of a dollar? There are many kinds of people from a different country are trading in the forex trade market, so what the price they will get against the dollar?
For this reason, all the forex markets are trading by comparing currency pairs.
For example, EUR/USD is a pair. Currently 1 EUR/USD = 1.4434 . This means you get 1.4434 dollars against 1 EUR. Oh! I forget to explain. USD means United States Dollar or American Dollar.
Let’s know about more currency pair:
1 AUD/USD = 1.0543, that means you get $ 1.0543 US Dollar against 1 Australian Dollar.
1 GBP/USD = 1.6422, that means you get 1.6422 USD against 1 pound.
1 NZD/USD = 0.8177, that means you will get 0.8177 American dollars against the 1 New Zealand dollar.
1 USD/JPY = 80.29, that means you will get 80.29 Japanese Yen with 1 dollar.
1 EUR/JPY = 115.91, that means you will get 115.91 Japanese Yen against 1 Euro.
Hope, you get a clear concept about currency pair.
So, if you want to write that 1 EUR/USD = 1.4434 if I write USD/USD by writing USD/EUR, then there is a problem?
No, of course not. But remember, the first currency of the currency pair indicates how much currency you will get.
1 EUR/USD = 1.4434. It means you will get 1.4434 dollars with 1 euro.
Then, 1 USD/EUR will indicate how much you will get with the 1 dollar. The answer will exactly the opposite, think about it.
Now, I have a question about all these currency pair. You have to answer this. Be careful don’t steal the answer from below.
1 EUR/GBP = 0.8708, what does this mean? If you need help you can see above, you can take the answer from the bottom.
A question still confused me, why are you taking so many numbers every decimal? For example, why you write down 1 EUR/USD = 1.4434? You can write at 1.44. In the stock market, this decimal is not adulterated, all the shares are worth 20 Tk, 60 Tk or maybe 1200 Tk. No one has ever heard of the share price of 20.2543 Tk. So Why is so adulterous?
Firstly, the ratio of the two currency is the pair of currency pairs on the Forex market. For example, EUR/USD means how much money will be made with 1 euro. We do not calculate how many shares of Meghna Cement will be shared by Janata bank shares in the stock market. And so, the share price of most shares in our country is in the old number, but some of the shares are in tenths.
In the forex market, it has been taken up to 4th after the decimal, because the forex market is generally more than the number 3 and 4 after the decimal of the movement. So it’s been standardized.
Let’s see at one glance from June 6 to June 10, 2011, the price of EUR/USD at 5 days:
Date – the highest day of the day – the lowest
June 6, 2011 – 1.4558 – 1.4658
June 7, 2011 – 1.4564 – 1.4696
June 8, 2011 – 1.4565 – 1.4695
June 9, 2011 – 1.4478 – 1.4653
June 10, 2011 – 1.4323 – 1.4551
It can be seen that the market that is moving is mainly being in the second, 3rd and 4th house after the decimal.
The answer to Question no.1 :
1 EUR/GBP = 0.8708 This means you get 0.8708 pounds with 1 euro