How Currencies are Traded in Forex ?

Foreign Exchange Market is a financial market where transactions are made on major currencies. Currencies are identified by a code of 3 letters:

* EUR (euro)
* USD (U.S. dollar)
* GBP (Pound sterling)
* JPY (Yen)
* CHF(Swiss franc) etc ...

An operation on the Foreign Exchange Market is the purchase or sale of a currency with another currency. Of course, buying Euro (EUR) against the dollar (USD) is selling dollars against the euro, and only the amount and price are expressed differently.

The Exchange Rate is the price of a unit of one currency expressed in another currency. If the price of the euro against the dollar, noted EUR / USD equals 0.9100, EUR 1 million exchanged against 910 000 dollars. One can of course assume that the dollar to euro, USD / EUR is equal to 1/0.9100 = 1.0989 and $ 1 million is exchanged against 1.098 900 euros.

Because of the importance of the dollar in international trade, the practice is to publish on the priority of each currency against the dollar and sense of listing is not necessarily the same. Thus, it shows:

* EUR / USD the euro against the dollar,
* GBP / USD the pound against the dollar,
* USD / JPY the dollar against the yen,
* USD / xxx dollar against other currencies.

2 An exchange between currencies other than the dollar is made in a course, said Cross, who inferred from 2 in those currencies against the dollar. The rule applies fractions. For example:

* GBP / EUR = (GBP / USD) / (EUR / USD)
* EUR / JPY = (EUR / USD) (USD / JPY)
* CHF / EUR = 1 / [(USD / CHF) (EUR / USD)].