In the foreign exchange market, you trade by buying and selling currencies, and trading is very simple: because the mechanism in the transaction is very similar to the mechanism of other markets (such as the stock market), if you have any trading experience, you should be able to quickly learn how Conduct foreign exchange transactions.
The purpose of foreign exchange transactions is to exchange one currency for another currency whose price is expected to change, and the result is to realize the appreciation of the currency you purchased.
EUR 10,000 x 1.18 = USD 11,800
EUR 10,000 x 1.26 = USD 12,600
The exchange rate of a transaction is simply the ratio of one currency to the value of another currency. For example, the USD / CHF exchange rate indicates how many US dollars can be purchased for one Swiss franc, or how many Swiss francs need to be exchanged for one US dollar.
How to read foreign exchange quotes
Currency always comes in the form of currency pairs, such as GBP / USD or USD / JPY. The reason they appear in pairs is that in every foreign exchange transaction, you buy and sell another currency at the same time. The following is an example of the exchange rate of the British pound to the US dollar:
The first listed currency on the left of the slash (“/”) is called the base currency (in this example, the British pound), and the second on the right is the so-called counteroffer or quote currency (in this example, the US dollar ).
When you buy, the exchange rate will tell you how many denominated currency units you have to pay to buy a unit of base currency. In the above example, you have to pay 1.51258 USD to buy 1 GBP.
When you sell, the exchange rate will tell you how many denominated currency units will be exchanged to sell a unit of base currency. In the above example, when you sell 1 pound, you will exchange for 1.51258 US dollars.
The base currency is the “base” of buying or selling
If you buy EUR / USD, it just means that you sold the quote currency while buying the base currency. In the words of the primitive people, “buy the euro and sell the dollar.”
If you think that the base currency will rise (appreciate) compared to the quote currency, you will buy the currency pair. If you think that the base currency will fall (depreciate) relative to the quote currency, you will sell the currency pair.