About Currency Pairs And Charts

For newbies that have zero background on Forex Trading, maybe they are confused on Currency Pairs, Price Quotes and Chart. When we say currency pair, we partner 2 currencies. To represent that you put the 3-letter symbol of the currencies together, one on the left and the other one on the right. For example, if you  combine Euro and Japanese Yen, you will write it like this, EURJPY. EUR is the 3-letter symbol for Euro and JPY is for Japanese Yen.

How to kow which one is on the left and right?

I don't how it started (I didn't bother to research about it :) ), but the industry seems to follow a standard on who's on the left when it comes to the 8 commonly traded currencies. There is some sort of list of priorities on what currency is on the left. Here's the priority list on order of from top priority to last.

EUR - Euro
GBP - British Pound Sterling
AUD - Aussie Dollar
NZD - Kiwi Dollar
USD - US Dollar
CAD - Loonie Dollar
CHF - Swiss Francs
JPY - Japanese Yen

For the exotic ones, I don't know if they also follow a standard list.

So how this works. If you will pair CAD and AUD, the AUD comes first, like AUDCAD. It's that simple.

Price Quote / Conversion Rate

On price quote, when you see a price of a currency pair on the trading platform, chart, internet, or TV (business channel). The number actually refers to the conversion rate of the left currency to the right currency of the. So when you see EURUSD is 1.20241, it means 1 EUR = 1.20241 USD.  So all charts that you see in your MT4 is based on this.

Price Movement In Pips and Points

Look at any Forex candlestick chart, the number you see on the rightmost part of the chart is the price quotes. In most brokers, you will see 5 decimal digits for non-JPY pairs, and 3 digits for any pair with JPY. Few old-fashioned brokers' server have 4-decimal digits and 2-decimal digits, respectively. Each movement interval in 5-digit is 0.00001, and 0.001 for 3-digit. These price movement is called "Points". Ten movement of Points is called "Pips", so 1 Pip = 10 points. For 4-digit and 2-digit price quotes, they move only in Pips.

What is Spread?

Let's go deeper. The price quote you see on the chart is the Bid Price. But brokers have 2 prices, the BID and ASK. Bid price is always lower than the Ask price. The difference between the two is called SPREAD. On "BUY LONG" perspective, Bid is the buyer's price, and Ask is the seller's price. On currency pair when you BUY LONG, meaning, you are buying the rightmost currency with respect to the leftmost currency. On "SELL SHORT" perspective, Ask is the buyer's price (price=1/Ask), and Bid is the seller's price (price=1/Bid).  On currency pair when you SELL SHORT, it means you are buying the leftmost currency with respect to the rightmost currency. Spread is simply the broker's income on exchange transactions. Some brokers that offer zero spread, they apply a fixed commission on every transaction per lot.

It may not be clear at first, look and explore the charts then read many times this post while exploring the charts. You will soon understand it.