Before starting to sell foreign currency online, there are a few things to keep in mind. The goal behind the notion of trading is to facilitate the exchange of one currency to another. The only thing that fluctuates and is due to change is the asset’s price. Let’s take a look at how you can be fully prepared for all the obstacles that may come your way when selling foreign currency online.
Things to keep in mind:
The first and most important notion to be aware of is the exchange rate. An exchange rate is simply the amount of one currency against the amount of the currency being exchanged. For example, USD/CHF. This is the ratio of US dollars that can buy one Swiss franc.
Another important point in trading is currency pairing. There are three major pairs in the currency world. Major pairs include the US dollar, minor pairs, which include major currencies, not the USD, and, lastly, exotic pairings that include one major currency together with a minor such as USD/HKD.
In addition, Point in Price also comes as important. PIP is the difference in the value of currency pairs. For example, if the USD/INR rate is 74.001 today (i.e., 1 USD=74.001 INR) while it was 74.7002 yesterday, the PIP is.0001. The amount of money forex traders make is determined by differences and when they purchase and sell currencies.
Lastly, we have Base and Quote Currency. When looking at currency pairs, the one located on the left is the base currency. The one located on the right is known as the quote currency. The base serves as a point of reference and always has a value of 1. It is how much of the quote currency is necessary to purchase one unit of the base currency. This is where the money-making comes when selling foreign currency online.
Forex traders will buy pairs when they believe the base currency will rise in value relative to the quotation currency. Alternatively, forex traders are more likely to SELL currencies if they believe the base currency will decline in relation to the quote currency.
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