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The market is open 24 hours a day, 5 days a week, to accommodate all of the time zones for all of the major players. How can you compare the value of a stock across international lines if the values are expressed in two separate, non-equivalent currencies? And how do you measure gains and losses when conversion rate is constantly changing.
This means studying not only domestic market trends and currency values, but also those of foreign markets. With so many variables and volatile currencies being exchanged, how can you know a good buy or sell when you see one without complete awareness of the value of foreign currency. Such sources can be found all over the Internet, as well as through many brokers, both on line and in person.
In this configuration, the two currencies are listed in an XXX/YYY ratio, with the XXX position referred to as the base currency. The smallest fraction, or decimal, in which a currency can be traded, is called a pip and this is ually the degree to which a cross-rate is expressed.
This ratio would be expressed as 1.000/117.456. The base currency is almost always expressed as a single unit (as in one dollar as opposed to ten dollars), and frequently that unit of measurement is the US dollar. Experiencing a change in the big figure – the whole number ahead of the decimal – unless it was only becae the number was already within a few thoandths, would represent much too large a shift in value for a single trading period and would be a rare occurrence that could cae the entire market to make a drastic swing in one direction or the other.
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The most common currencies found in Forex are the US dollar, the British pound sterling, the Euro, the Japanese yen, and the Atralian dollar. We will discs this process, as well as other ways to take advantage of the Foreign Exchange Market (like arbitrage) in more depth in future chapters.
Such ideas will not seem so ‘foreign’, and you will be caught up and knowledgeable right along with the pros. Following charts, listening to the advice of market analysts and chartists, and learning to make educated predictions yourself will help you keep track of vario marketing trends. In fact, sometimes the best first step to entering the market is to watch shows about it or read the financial sections of the newspaper that detail the trends and expected outcomes.
What factors affect the value of currency on Forex, and is there any way to control this. It also makes items in the foreign country less expensive to trade in U.S. dollars.
While it may seem that purposely adjting the value of a nation’s currency is ‘cheating’, or taking an unfair advantage by making foreign products cheaper to purchase and increasing the value of exports, there are regulations in place to prevent the manipulation of exchange rates for such purposes. However, what happens when the value of a foreign currency changes due to market fluctuation rather than purposeful reductions or increases by a federal government or federal bank? What effect do appreciation and depreciation have on the stock market.
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