Currency Pairs Explained
When you trade forex, you trade what are known as ‘currency pairs’. The first currency in each pair is known as the ‘base’ currency, while the second is the ‘quote’ currency.
For example, if you were trading GBP/USD, the pound sterling would be the base currency, and the US dollar would be the quote. With ADSS Hong Kong, you can trade forex on over 60 different currency pairs.
When trading forex, you speculate on price movements. You can either ‘buy’, which is known as ‘going long’ or ‘sell’, known as ‘going short’. The decision you make will depend on a variety of factors, including but not limited to economic events, news and your trading strategy.
When you ‘buy’, you believe that the base currency will strengthen in value or the quote currency will weaken against it. The opposite is true when you ‘sell’. Here you expect that the base currency will weaken, or the quote currency will strengthen against the base.
What are Pips, Spread, Margin and Stop Losses?
When you start trading forex, you will also be exposed to further terminology. Here are a few of the basics to help get you started:
- Pips: The digits after the decimal points are known as ‘price interest points’.
- Spread: Each currency pair has a ‘bid’ price and an ‘offer’ price. The spread is the difference between these numbers and is the cost of the trade.
- Margin and Leverage: We offer leverage of up to 20:1. Using leverage or trading on the margin means that you only have to hold a small proportion of the amount required to open a forex trade.
- Stop Losses/Limit Orders: You can protect your trades with stop losses, which automatically close trades at a set price in order to limit any potential losses.
To learn more about forex trading terminology, you can join one of our Seminars. Alternatively, you can open an account today.