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Forex Trading Tips - How To Understand and Appreciate The Currency Rates

Most of the time currency rates are referred to as foreign exchange rates and these rates will tell you how much of the currency you will need to buy of a unit of another currency. These rates will be quoted on what are called exchange rate desks as well as banks and in the media.

There are also interbank rates and these are rates that banks and brokers will use when they work with each other and then there are also retail rates and these are what individuals get when they are considering exchanging different currencies.

You will need to make sure and identify what the exchange rate is that you need to get and then find out what their codes are. You will need to know what the currency exchange rates are so you can determine if and when you want to trade. You can then look up their international codes this will usually be just three letters all in capital letters. For example the euro would be EUR and of course the U.S. Dollar would be USD.

Next you will need to look up an exchange rate for all the currency you are interested in. You can simply use any online search engine to look for the codes and the exchange rate that you might be interested in. If you are considering the exchange rate of the euro and the US dollar then you would simply type in “EUR/USD” or “USD/EUR”. The search engine will be able to understand what you are asking with no problems.

Once you have the information brought up you can then read the exchange rate. Usually the rate is going to be bigger than 1. This is because traditionally the rates are given in a way so you will know just how much of the cheaper currency that you are going to need in order to buy a unit of the more expensive currency. So, if a euro is more expensive that the dollar the exchange rate would show how many dollars it would take to buy just one euro. So it would be noted as EUR/USD. The first would be the EUR and would mean that it was the more expensive currency and then the USD would be the less expensive currency.

If by chance you need to find out the reverse of the exchange rate you would simply divide the 1 by the exchange rate of the currency. Example would be if the EUR/USD was 1.3 then the USD/EUR would be 1/1.3=0.77. And this would mean that it would take 0.77 euros to buy just one US dollar.

This is something that should be considered second nature for someone who wants to go into Forex trading.

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