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Understanding Currency Rate Movement

As we trade, normally, the value of currencies change from one point to another. Question is, how does it affects the currency pair? Specifically, what an increase or decrease in the quote for a particular currency pair tells us about the value of the currencies which make up that pair? First, we must need to know how to read currency quote. After learning it then we can practically begin understanding the importance of currency rate movements.

As we all know, currencies are quoted in pairs or in terms of how much one currency is worth in terms of another currency. When we read a currency quote what we are seeing is how much of the second or counter currency in the pair it takes to buy one of the first or base currency in the pair. With this in mind if the quote for a particular currency pair increases this means that it now takes more of the counter currency to buy 1 of the base currency. Another way of looking at this is that when the quote for a particular currency pair increases this means that the first or base currency in the pair has strengthened and the second or counter currency in the pair has weakened. Learn more about Forex trading basics at http://forex.tradingcharts.com/learn_forex/3._Forex_Trading_Basics.html

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Another way of looking at this is that when the quote for a particular currency pair decreases this means that the first or base currency in the pair has weakened and the second or counter currency in the pair has strengthened.
Although a simple concept, this is one of the most confusing aspects of trading foreign exchange and something that people still mix up even after years of following the market.

The video provided above clearly illustrates the importance of currency rate movements. Basically, it is embedded in the article to help readers clearly understand the topic and visualize every important aspects of it. It aims to help traders especially those new in the forex world.

Click here to learn the advantages and disadvantages of currency trading.

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