How You Make Money in Forex

How You Make Money in Forex The object of forex trading is to exchange one currency for another in the expectation that the price will change, so that the currency you bought will increase in value compared to the one you sold. An exchange rate is simply the ratio of one currency valued against another currency. The first listed currency to the left of the slash is known as the base currency, while the second one on the right is called the counter or quote currency. When buying, the exchange rate tells you how much you have to pay in units of the quote currency to buy one unit of the base currency. When selling, the exchange rate tells you how many units of the quote currency you get for selling one unit of the base currency. If you buy EUR/USD this simply means that you are buying the base currency and simultaneously selling the quote currency. You would buy the pair if you believe the base currency will appreciate relative to the quote currency. You would sell the pair if you think the base currency will depreciate relative to the quote currency. The bid is the price at which your broker is willing to buy the base currency in exchange for the quote currency. The ask is the price at which your broker will sell the base currency in exchange for the quote currency.