For example, if you choose to trade GBPUSD and you think the value of the GBP will rise against USD, you go long (buy). If you think GBP will fall against USD, you go short (sell). If your prediction is correct, you make a profit. If your prediction is incorrect, you would make a loss.
WHAT IS CURRENCY PAIR TRADING ?
Currency Pair Trading is the simultaneous buying and selling of the world’s international currencies in a centralized global market. It is regulated, standardized and therefore exchange traded. As one of the largest and most liquid financial markets in the world, its total average turnover per day is reported to exceed $11000 trillion dollar.
HOW DO YOU TRADE IN CURRENCY PAIRS?
Currency pairs are available to trade. When trading Currency Pairs, you speculate whether the price of one currency will rise or fall against another.
CURRENCY PAIRS
Currencies are always traded in pairs, for example GEURUSD. The first currency (EUR) is called the ‘base currency’. The second currency (USD) is the ‘counter currency’. How currencies are displaying shows us how many units of the counter currency you can buy with one unit of the base currency. This is the exchange rate, or in other words, how many US dollars you can buy for one euro.
Currency pairs can generally be divided into three groups: Direct, Indirect, and Cross.
For example, if you choose to trade GOLDGBPUSD and you think the value of the GBP will rise against USD, you go long (buy). If you think GBP will fall against USD, you go short (sell). If your prediction is correct, you make a profit. If your prediction is incorrect, you would make a loss.
Direct
Currency pairs that contain the US dollar as counter or quote currency and not as a base currency are known as direct currency pairs. Examples include EURUSD, GBPUSD, AUDUSD.
Indirect
Currency pairs which contain the US dollar as a base currency and not as a quote currency are known as indirect currency pairs. Examples include USDCHF, USDJPY, USDCAD.
IndirectCross
Currency pairs which do not contain the US dollar are known as cross currency pairs. Examples include EURGBP, EURCHF, GBPJPY and CHFJPY