Getting Started in Currency Trading Michael Archer Jim Bickford

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Getting Started in Currency Trading: Winning in Today’s Hottest Marketplace
by Michael D. Archer and Jim L. Bickford
Published in 2005

Key Takeaways
In this post I summarize what I believe are the key takeaways of the book. If you like what you see, I encourage you to buy the book.  The book is an excellent introduction to currency trading.  Even if you don’t trade currencies, its a worthwhile read for any investor – especially if you are an active trader.  The book includes trading insights, regardless of what you trade or invest in.  The book is a quick read and the chapters are short and straightforward.

Note: the pages referenced in this post are from the 1st Edition published in 2005.  However, there is a newer edition published in 2008, that you would likely want to buy instead.

Page 28 – What Every Trader Must Know – Forex Terms
Every Forex trade involves the simultaneous buying of one currency and the selling of another currency.  These two currencies are always referred to as the currency pair in a trade.  The seven most frequently traded currencies are called the major currencies (USD, EUR, JPY, GBP, CHF, CAD, and AUD). The most frequently traded minors are the New Zealand dollar (NZD) the South African rand (ZAR), and the Singapore dollar (SGD).

The base currency is the first currency in any currency pair.  It shows how much the base currency is worth as measured against the second currency.  For example, if the USD/CHF rate equals 1.6215, the one USD is worth CHF 1.6215. The quote currency is the second currency in any currency pair.  This is frequently called the pip currency and any unrealized profit or loss is expressed in this currency.  A pip is the smallest unit of price for any currency.  Most currency pairs consist of five significant digits and most pairs have the decimal point after the first digit, e.g. EUR/USD equals 1.2812.  In this case, a single pip increase would be a pip increase to EUR/USD 1.2813.  A single pip decrease would be a pip decrease to EUR/USD 1.2811.

So, for example, when a the EUR/USD quote is increasing from 1.300 to 1.400, the EUR is strengthening – it previously could only buy 1.300 USD and now it can buy 1.400 USD.  The reverse is also true.  When the quote is decreasing, the first currency in the pair, the base currency, is weakening. So, for example, while the EUR could previously buy 1.300 USD, now it can only buy 1.200 USD.  In this case, it has weakened.

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