Articles >> Basics of Forex Trading Part 1  Part 2

Before entering and trading in the forex market we need to make sure we understand the basics of forex market and how does it work, otherwise we will find ourselves lost where we less expected. This is what I'm going to clear in this article, to understand the basics of currency trading. Investors and forex traders around the world look to the forex market as a new speculation business. But, how are transactions made in the Forex market? (Peter Bain Forex System) or, what are the basics of forex trading?

What is traded in the forex market?

Peter Bain Forex System, The instrument traded by forex traders and investors are currency pairs. A currency pair is the exchange rate of one currency over another.

The most traded currency pairs are:

EUR/USD: Euro
GBP/USD: Pound
USD/JPY: Yen
USD/CHF: Swiss franc
AUD/USD: Aussie
USD/CAD: Canadian dollar

These currency pairs generate about 80% of the overall generated volume in the entire forex market. The first currency of each currency pair is referred as the base currency, while second currency is referred as the counter or quote currency.  So, if a forex trader - Forex Trading Course Online Trading Newslett - goes long or buys the Euro, he is simultaneously buying the EUR and selling the USD. If the same forex trader goes short or sells the Aussie, he is simultaneously selling the AUD and buying the USD. Peter Bain Forex Trading Pivot Points System.

Each currency pair is expressed in units of the counter currency needed to get one unit of the base currency. If the price or quote of the EUR/USD is 1.2545, it means that 1.2545 US dollars are needed to get one EUR.

Bid/Ask Spread
All currency pairs are commonly quoted with a bid and ask price.Peter Bain Forex System. The bid is always lower than the ask and is the price your broker is willing to buy at, thus the trader should sell at this price. The ask is the price your broker is willing to sell at, thus the trader should buy at this price.

EUR/USD 1.2545/48 or 1.2545/8
The bid price is 1.2545
The ask price is 1.2548