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So, you want to learn how to trade currency on the foreign exchange market? The process of trading currencies appears very straight-forward on the surface but, there is more to it than meets the eye.

The currency trading tutorial you are about to receive here will give you a basic thought of how things works. But, you must keep in mind that this tutorial is only scratching the surface. The Forex market is complex, quick-paced and requires serious further study if you wish to trade successfully.

Now that we have that disclaimer out of the way, let’s start by looking at the fundamental unit involved in every trade: the ‘currency pair’.

What are currency pairs?

Currency pairs are units of 2 currencies involved in a foreign exchange trade. For example, if you want to sell U.S. dollars to buy Euros, you would look at the exchange rate quoted for the EUR/USD currency pair. Or, if you wanted to sell Euros to buy U.S. dollars, you would look at the exchange rate quoted for the USD/EUR currency pair.

You might thinking: “Aren’t they the same thing?” Well, they nearly are, but you must look at the right pair, in the right order, based on the currency being bought.

There are two reasons for doing this:

First, it is simpler to calculate the results of your exchange in terms of how much of the base currency you can buy with your ‘quote’ currency. Your base currency is the currency you intend to buy, and the quote currency is the currency you intend to sell in exchange for the base.

When quoting an exchange rate, your broker will list the base currency first in the pair, and the quote currency second.

This means that when you see a pair like EUR/USD, you are seeing the cost of 1 Euro in U.S. Dollars. An exchange rate quote of EUR/USD = 1.4436 means that 1 Euro costs $1.4436 in U.S. Dollars.

Likewise, the USD/EUR pair indicates the cost of 1 U.S. Dollar in terms of Euros. An exchange rate of USD/EUR = 0.6834 would mean that 1 U.S Dollar costs 0.6834 Euro.

The second reason for looking at the right buy/sell ordered pair is that you’ll want to know the difference between the ‘bid price’ (exchange rate) and the ‘question price’ (what the market makers want for the currency).

The difference between bid price and question price make up what is known as ‘the spread’. Forex traders are subject to spreads when opening or closing trades in the buying position. In other words, you are always subject to a spread when you buy, regardless of whether you are opening or closing the trade.

Open buy -> spread
Close sell -> no spread

Open sell -> no spread
Close buy -> spread

Let’s say that you want to buy the EUR/USD pair. The bid price is 1.4436. The question price may be something like 1.4440. You must pay the spread of 0.0004 in order to do the trade.

Those are the basics of a currency trade, but there are other factors to take into consideration. In order to make a profit on currency exchanges, you must also know how to calculate the cash value of exchange rate fluctuations in terms of ‘basis points’ – or, in Forex jargon – ‘pips value’.

This currency trading tutorial will not cover pips values, but it is a concept you should investigate further if you want to master the basics of trade on the foreign exchange.

The recipe is, at the opening of the market, choose currency that is there. For a newbie I recommend that it’s best to enrol in a trading platform and programme at where you can learn from the experts, have a high accuracy in trading all types of forex instruments and reduce your margin of error. Please email me daniel at if you have any more queries. Cheers! Daniel Tay.

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