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Is the price of a currency pair expressed as amount of foreign currency per unit of domestic currency.
In other words, when an indirect quote is given, the exchange rate is expressed relative to a fixed amount of the national currency (1 unit), while the amount of foreign currency is variable.
For example, if we are in the United States, the indirect quote for the Canadian dollar would be 1.17 CAD = 1 USD, so the exchange rate of the indirect quotation is expressed as USD/CAD 1.17 because it is the expression that reports the amount of CAD per unit of USD which is the national currency (for 1 USD we can obtain 1.17 CAD). If we were in Canada the indirect quotation of the US dollar would be 0.85 USD = 1 CAD (CAD/USD 0.85 indicates that for 1 CAD, which is the national currency, we get 0.85 USD). As we can see, in an indirect quote the base currency of the currency pair is the national currency.
In this article we will define two basic concepts for trading in Forex: the base currency and the quote currency.
The base currency is the first currency listed in a currency pair traded in the Forex market. Sometimes you can also see this term as primary currency (although this term is not very suitable for its meaning in economics). In accounting base currency is the one used to represent all company accounts.
For example, if we have the pair EUR/USD, the euro (EUR) is the base currency and the US dollar (USD) is the quote currency or counter currency. The price given for the pair represents how much is needed of the quote currency to buy one unit of the base currency or, which is the same, how much of the quote currency can be obtained when one unit of base currency is sold.
The exchange rate, also referred to as conversion rate or foreign exchange rate is the price at which a currency of a country can be converted (“changed”) in the currency of another country.
The system of exchange rates among currencies stems from the need of foreign currency by companies and nationals. In other words, the exchange rate comes from the movement of capital, goods, services and people across borders, that is, the existence of international trade. For example, when a company sells products to a foreign country, it is natural that this company wants to get paid in their national currency; therefore, the foreign company must buy the domestic currency of the manufacturer to pay the products purchased. There are also many situations in which anyone may need a foreign currency, for example, when traveling need currency of the destination country. The result is a foreign exchange market in which people, companies and other participants buy and sell foreign currencies.
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The Initial Jobless Claims indicator is a report that records how many people have applied for unemployment benefits in the United States, providing information on the state of the labor market of that country. This is a weekly published data, and provides information on how many people applied for unemployment benefits last week. Therefore, this report is also known as weekly jobless claims.
The report of the Initial Jobless Claims is prepared by the Employment and Training Administration of the U.S. Department of Labor, and is published on Thursday of each week at 13:30 GMT, with data from the previous week.
In the Forex market, currencies are traded in pairs. In these pairs each currency has meaning in relation to the other, so always stick together.
The two currencies in a pair are traded against each other. The rate or price at which these currencies are traded is known as the exchange rate. The exchange rate is regularly affected by supply and demand for currencies that make up the pair.
Regarding the issue of probability, a lack of understanding can lead to incorrect assumptions and predictions about the occurrence of certain events. One of these incorrect assumptions is known as the Gambler´s fallacy.
In the gambler’s fallacy, an individual mistakenly believe that the occurrence of a certain random event is less likely to occur after an event or series of events. This line of thinking is incorrect because the past events do not change the likelihood of certain events occurring in the future.
For example, consider a series of 20 coin tosses in which all have landed with the head side facing up: Under the gambler’s fallacy, a person can predict that the next coin toss is more likely to fall to the tail side facing up. This line of thinking is an incorrect understanding of probability, because the possibility that a coin lands heads or tails is always 50%. Each coin toss is an independent event, which means that each and every one of the previous tosses have no effect on future releases.
Island reversal is a trend change pattern which forms a gap on both sides. This chart pattern is most likely shown when the market trend proceeds to its last level. The name island reversal is obtained from the fact which the candlestick appearing alone, that is quite alike in the island. This chart pattern explains an increase in the volume amidst the primary gap and the following gap proceeding in the opposite direction.
The island reversal pattern is driven across the pre-market trading and pro trading as well. Generally, the island reversal chart pattern is described as a distinct trading activity that works within a range and moreover it is separated with a move. The separation is resulted due to an exhaustion gap and the opponent direction results with a breakthrough gap.