Lesson #1 – Currency Pairs and Forex Market Pricing Behavior

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Currencies come in pairs, like the Euro versus the U.S. Dollar, or “EUR/USD”. It may surprise you, but currencies have no “intrinsic value”, as with stocks. Their value is “relative” to each other and the economies of the respective countries that stand behind them. The first currency listed is always known as the “Base” currency, and the second one, as the “Counter” currency. A quote of “1.3000” would mean that one Euro would buy 1.30 Dollars. If the rate goes up, the Euro is said to be strengthening.

Forex markets are of two types – trending or ranging. A Trending Market is one where prices are moving in a single direction, either up or down, but not sideways. A Ranging Market is a market where the price is moving back and forth between a higher price and a lower price. It is commonly referred to as range bound, choppy, sideways or flat market. The chart below illustrates both types:
Lesson one

Notice that the pricing always moves in a jig-jag, almost wave-like, fashion, not a straight line. These vibrations are what provide the opportunity for trading gains. The prices depicted here are on a daily basis, but the timeframe can be adjusted. Over this two-year period, there were nine trending movements, accompanied by six ranging periods, but ranging periods occupied roughly 70% of the time. Trends are infrequent, but when they happen, your opportunity for a more than favorable gain is much greater.

Learn forex trading

Read our most comprehensive and fairly easy to understand article on many different price movements.

Next: Lesson #2 – Initial Set-Up Preparation

Previous: How do we get started?

Forex Lessons in this Forex for Dummies Course:

Forex for Dummies – Introduction

How do we get started?

Lesson 1: Currency Pairs and Forex Marketing Pricing Behavior

Lesson 2: Initial Set-up Preparation

Lesson 3: Forex Strategy Development 

Lesson 4: Execution of your forex trading plan

Concluding remarks


Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit. The high degree of leverage can work against you as well as for you.


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