Forex Currency Exchange
By buying rate refers to the price at which side, putting quotation, agreed to buy the base currency you have. Under the sales rate refers to the price at which side, putting quotation, you agree to sell the base currency. That is, buying and selling concepts in relation to you, as it were "inverted". Bought and sold in this formulation do not you and the party offering you a quote. In other words, if you are going to buy the base currency, you need to look at the sale price (ask). If you are going to sell the base currency of the quotation, then you need to look at the purchase price (bid).
For example, if you intend to buy 100 US dollars, Japanese Yen, with the quotation USD / JPY 104.75 / 104.85, you will need 100 x 104.85 = 10485 Japanese Yen. If you want to buy Japanese Yen, sold $ 100, you get a 100 x 104.75 = 10475 Japanese Yen.
Depending on the trading platform provided by online brokers for their clients, graphical representation of quotes will vary.
Since the digits of quotations (big figure) change slowly over time, the selling rate (ask) the official quotations on Forex they often displayed. For example, by the aforementioned quotation of the US dollar to the Japanese Yen may look like USD / JPY 104.75 / 85. The term big figure at the dealership jargon means the base number of 100 points, so the selling rate (ask) quotes, as a rule, only the last 2 digits.
The difference between the rate buying and selling rate (the right and left side of the quotation) is called a spread (spread). The spread is the basis of the profit for the party, to quote.
Consider the exchange office with the typical Forex US dollar against the Japanese Yen USD / JPY 104.75 / 85 with a spread of 10 points. You sell $ 100 and get 100 x 104.75 = 10475 Japanese Yen. If someone else is now to come and buy in exchange offices the 100 US dollars, it will be forced to pay a 100 x 104.85 = 10485 Japanese Yen. Thus, the currency exchange will earn 10,485 - 10,475 = 10 Japanese yen. As you can see, currency exchange earns on opposite transactions with currency, ie, when someone buys and someone sells. This principle is the basis of receipt of brokerage houses profits in the Forex market.
Profit in 10 Japanese Yen (about 10 cents, based on the US dollar) is negligible compared to the amount of the transaction to $ 100. For this reason, the exchange offices use a much larger spread than the quotes on forex, where the minimum transaction size is much larger and is about US $ 100 000. More real to the exchange point quotation would be USD / JPY 102.00 / 108.00 with a spread of 600 points. Then profit from the transaction in the United States amounted to $ 100 600 Japanese Yen (or 5.56 US dollars, based on the same quotation).
We will learn how to determine the profit on the transaction and recount it in the currency of interest to us in the following sections of the site. At the moment it is only important to understand that in any quotations Forex presents two courses (buying and selling rate of course), and that the difference between these rates is called a spread and is expressed in points.
Thus, the spread - a source of income for the party, to quote. For this reason, the retail brokerage houses representing private investors the opportunity to work on Forex via the Internet, as a rule, do not take commissions on the transaction - they earn the spread.
In the following chapters the site, we will learn to open and close positions in the Forex will be explained in detail why a large spread is not profitable for the private investor. In the meantime, you should understand that when you select an Internet broker in the first place should pay attention to the value of the spread, which offers on - the smaller the spread, the better!
Where are the courses buying and selling? Who sets them? Quotations of currencies are determined solely by supply and demand of currencies on the foreign exchange market.
The main influence on currency exchange rates have a major active participants of the Forex market. Picking up for the main course change, large passive participants and millions of small parties also affect the further change in rates. Thus, if the majority of participants trying to sell separately taken currency, the price falls on it. If the primary trend is to buy the currency, the price for it is growing. Trader's task, therefore, time to recognize this trend.