What is Quote Currency and Why You Need To Know about it?
Foreign Exchange trading would not be possible without the presence of all of its components. It is far better to know what every terminology may mean first before digging in deep to the business itself.
In this article, we are going to tackle first things first. Quote currency, an intricate term for the rookies but it can be fully understood indeed if faced squarely even by a non-professional foreign exchange trader or broker. It just requires genuine attention for one to determine the real meaning and value of that term as well as its usage and importance in the currency trading field.
Quote currency simply means the second currency in the currency pair but it still has its specific types. Quote currencies could either be a direct or an indirect one.
Direct quotation can be defined as a barter or exchange rate where a predetermined unit of currency 1 (base currency) is expressed in the local or domestic currency in contrast to the foreign quoted currency. The foreign currency in this case is variable.
Let’s take this situation for an example, where USD acts as the currency 1 or base currency against JPY or the Japanese Yen which is the quote currency. This kind of quotation is called direct quotation from an American merchant’s perspective for his currency is USD and quoted foreign currency is Japanese Yen. Indirect quotation on the other hand takes precedence when the trader is American and his base currency is GBP (British pound or Sterling) and his quoted currency is Japanese Yen for that matter.
Quote Currencies as how it has been said earlier may be variable. The only determinant as to whether the quotation is direct or indirect one is the base currency, that is, with respect to the local currency of the trader parse.
Traditionally, traders were required to convert all their money to USD before they were allowed to trade and convert to their desired currency. But that barrier has been overcome not long ago by what is referred to as the cross currency, wherein a certain currency pair can be readily traded without it having converted to U.S. Dollars first.
Many things have been done and modified to make currency trading easy and many have benefited from such an adjustment.
But despite all of these technical enhancements, the profit of the trader still greatly depends on the skills of the trader and on how he handles his investments. As most people would know, currency trading is not an easy endeavor and not a short cut to becoming a millionaire. Even expert traders tend to fail and lose some at times. No one is exempted from this fact.
No matter what happens, be on guard and watch close for the trading indicators to have an idea on what’s happening next. Just always remember that there is no powerful weapon than a keen eye and a quick mind. Trust your instincts and know what’s best.