Cashing in on Price Movements

Cashing in on Price Movements

Trading Forex is exciting business. The market is always on the move, and every
tiny shift in currency rates can mean profits and losses of hundreds and even
thousands of dollars!
Let’s demonstrate how that can happen:
In general, the eight most traded currencies on the Forex market are:

USD ----> U.S. Dollar

EUR ----> Euro

GBP ----> British Pound

JPY ----> Japanese Yen

CAD ----> Canadian Dollar

CHF ----> Swiss Franc

NZD ----> New Zealand Dollar

AUD ----> Australian Dollar

Forex trading is always done in pairs, since any trade involves the simultaneous
buying of a currency and selling of another currency. The trading revolves around
18 main currency pairs. These pairs are: 

USD/CAD ----> EUR/JPY
EUR/USD ----> EUR/CHF
USD/CHF ----> EUR/GBP
GBP/USD ----> AUD/CAD
NZD/USD ----> GBP/CHF
AUD/USD ----> GBP/JPY
USD/JPY ----> CHF/JPY
EUR/CAD ----> AUD/JPY
EUR/AUD ----> AUD/NZD

When buying or selling a currency pair, each pair has its own Bid/Ask rate, for
example : 

 

Pair | Bid      | Ask
EUR/USD | 1.5420 |     1.5422

This means you could either:

 
Buy the pair at the Ask rate
Which means:
Buy 1EUR / Sell $1.5422
‐or‐
Sell the pair at the Bid rate
Which means:

Sell 1 EUR / Buy $1.5420

OK, but where’s the opportunity for profit?
The currency pair rates are volatile and constantly changing.
One way to profit is by buying a pair, then selling it at a higher rate.
The second way is by selling the pair, then buying it at a lower rate.