US Dollar vs Euro History

Characteristics of Foreign Exchange

Foreign exchange is the system of trading one currency for a foreign currency (hence the name). This system is one of the most common investments being done today, as the dynamics are relatively less complicated than stocks, and sometimes profits can be made faster. However, they do have their own dynamics and unpredictability, and these have to be understood by the beginning trader as a necessary first step in FX trading.

The main dynamic in foreign exchange is that currencies are traded against each other. Any currency from any country can be used in trading for another currency of another country (for instance, USD for EUR). Together, they form a pair, called currency pair. Their designated names follow an international standard called ISO 4217 to avoid confusion. In this example, they are written as EUR/USD, where the first currency is the base from which its equivalent is written in the other currency. If 1 euro equals 2.15 dollars, then it will be written as (EUR/USD) 2.15.

Another thing in foreign exchange is that the different factors affecting one currency, such as economic, political, or market psychology, necessarily affects both it and its partner in the currency pair. This is called positive currency correlation. Consequently, it directly affects trading on that pair. For instance, if the EURUSD goes down, it may imply that conditions are getting better in the US market, or getting worse for the euro trading nations. At this point, if one believes the euro will increase in value soon, then he might decide to buy some euro using US dollars. Then when conditions get better for the euro or the US economy grows worse, the EURUSD will go up, and he can decide to sell the euro he bought for a profit.

One should also remember that there are very little regulations for the prices being set in foreign exchange. For this reason, one trading center will have different prices than other centers, although these prices are kept close enough to prevent people from exploiting them. It's a good idea to check forex news sites to get the most up to date information. What this implies is that beginning trader should strive to find the fairest deals available. Naturally there are more dominant trading centers like London, and their prices are the ones being usually quoted.

Once the above characteristics have been understood, the next step is to learn about the different currencies and their histories as much as possible. You can do so by watching the forex videos. This will facilitate the appreciation of the relative strengths of the different currencies, and how they usually perform in the market. In the long run, this will enable smarter trading decisions.

Now that you know some of the more important parts of Forex currency trading you should also visit foreign exchange currency for even more. As with all types of expertise, the more you know and the more resources you have at your disposal the more successful you will be. Forex trading is an exciting and difficult field to practice in but with the right tools and programs to help you along it can be a lot of fun.Forex Currency Trading.

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