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6 May, 2022
Know When to Buy or Sell a Currency Pair

Abstract:Forex trading entails attempting to forecast which currency wikifx will rise or fall in value in relation to another currency. When should you purchase or sell a currency pair? In the following cases, we will utilise fundamental analysis to determine whether to buy or sell a specific currency pair.

  Forex trading entails attempting to forecast which currency will rise or fall in value in relation to another currency.

  When should you purchase or sell a currency pair?

  In the following cases, we will utilise fundamental analysis to determine whether to buy or sell a specific currency pair.

  The supply and demand for a currency fluctuates owing to a variety of economic factors, causing currency exchange rates to rise and fall.

  Each currency is associated with a certain country (or region). As a result, forex fundamental analysis focuses on the entire status of the country's economy, such as productivity, employment, manufacturing, international trade, and interest rates。

  Get up!

  Don't worry if you constantly fell asleep in economics class or simply skipped economics class!

  In a subsequent session, we will go over fundamental analysis.

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  But for the time being, pretend you know what's going on...

  EUR/USD

  The euro is the base currency in this case, and thus the “basis” for the buy/sell.

  If you anticipate the US economy will continue to deteriorate, which is terrible for the US currency, you would place a BUY EUR/USD order.

  By doing so, you have purchased euros with the assumption that they will appreciate in value relative to the US dollar.

  If you believe that the US economy is robust and that the euro would fall in value versus the US dollar, you would place a SELL EUR/USD order.

  You have sold euros with the anticipation that they will fall in value against the US dollar.

  USD/JPY

  The US dollar is the base currency in this case, and thus the “basis” for the buy/sell.

  If you believe the Japanese government would lower the yen to benefit its export economy, you would place a BUY USD/JPY order.

  You have purchased US dollars with the hope that they will appreciate in value against the Japanese yen.

  If you believe that Japanese investors are withdrawing money from US financial markets and changing all of their US dollars back to yen, which will harm the US dollar, you would place a SELL USD/JPY order.

  You have sold US dollars with the anticipation that they will fall in value versus the Japanese yen.

  GBP/USD

  The pound is the base currency in this example, and hence the “basis” for the buy/sell.

  If you believe the British economy would continue to outperform the US economy in terms of economic growth, you would place a BUY GBP/USD order.

  You have purchased pounds with the idea that they will appreciate in value against the US dollar.

  If, like Chuck Norris, you believe the British economy is faltering but the American economy is strong, you would place a SELL GBP/USD order.

  You sold pounds with the idea that they would fall in value versus the US dollar.

  How to trade forex with USD/CHF

  The US dollar is the base currency in this case, and thus the “basis” for the buy/sell.

  If you believe the Swiss currency is overvalued, place a BUY USD/CHF order.

  You have purchased US dollars on the expectation that they will appreciate against the Swiss franc.

  If you believe that the weakening of the US housing market will harm future economic development, which will weaken the currency, you would place a SELL USD/CHF trade.

  You have sold US dollars in the belief that they will devalue against the Swiss franc.

  Trading in “Lots”

  When you go to the supermarket to buy an egg, you can't just buy one; they come in dozens or “lots” of 12.

  It would be equally dumb to purchase or sell 1 euro in forex, thus they normally come in “lots” of 1,000 units of currency (micro lot), 10,000 units (mini lot), or 100,000 units (standard lot), depending on your broker and account type (more on “lots” below).

  

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