All forex is quoted in terms of one currency versus another. Each currency pair has a ‘base’ currency and a ‘counter’ currency. The base currency is the currency on the left of the currency pair and the counter currency is on the right.
For example, in EUR/USD, EUR is the ‘base’ currency and USD the ‘counter’ currency. Forex price movements are triggered by currencies either appreciating in value (strengthening) or depreciating in value (weakening). If the price of EUR/USD for example was to fall, this would indicate that the counter currency (US dollars) was appreciating, whilst the base currency (Euros) was depreciating.
When trading forex prices, you would buy a currency pair if you believed that the base currency will strengthen against the counter currency. Alternatively, you would sell a currency pair if you believed that the base currency will weaken in value against the counter currency. Some examples of major currency pairs are:
EUR/USD (The value of 1 EUR expressed in US dollars)
USD/CHF (The value of 1 USD expressed in Swiss francs)
The difference in the BID/ASK of the currency pair is referred to as the ‘spread’. An example would be EUR/USD dealing at 1.4700/1.14703 (in this case the spread is 3 pips). The exceptions to this are the JPY pairs which are quoted to just 2 decimal places. A USD/JPY price of 96.41/96.44 displays a 3 pip spread.
Pips (Percentage in Points)
Pip stands for Percentage in Points. PIP is considered as the minimum price change in a currency pair. Most of our currency pairs are quoted to 5 decimal places with the change from the 4th decimal place (0.0001) in price commonly referred to as a ‘pip’. For example, if the price of the EUR/USD forex pair moved from 1.13700 to 1.13720, it is said to have climbed by 20 pips.
Foreign exchange is a leveraged (or margined) product, which means that you are only required to deposit a small percentage of the full value of your position to place a forex trade. This means that the potential for profit, or loss, from an initial capital outlay is significantly higher than in traditional trading. AXNFX provides a standard leverage of 1:400 for all the clients.
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Risk Warning: Trading Forex and CFDs involves significant risk and can result in the loss of your invested capital. You should not invest more than you can afford to lose and should ensure that you fully understand the risks involved. Trading leveraged products may not be suitable for all investors. Before trading, please take into consideration your level of experience, investment objectives and seek independent financial advice if necessary. It is the responsibility of the Client to ascertain whether he/she is permitted to use the services of the PLANET-Financial brand based on the legal requirements in his/her country of residence. Please read PLANET-Financial’s full Risk Disclosure.
Regional restrictions: PLANET-Fianancials brand does not provide services to residents of the USA, Belize, Japan, British Columbia, Quebec and Saskatchewan and some other regions. Find out more in the Regulations section of our FAQs.