Start with one simple idea
A Forex price never describes one currency on its own. It always compares two currencies.
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A simple example
If EUR/USD = 1.1000, it means:
€1 = $1.10
If EUR/USD rises, the euro has become stronger relative to the US dollar. If it falls, the euro has become weaker relative to the US dollar.
Why does Forex exist?
Currencies need to be exchanged every day. A company may need to pay a supplier in another country. A traveller may need another currency. A fund may hedge currency risk. Banks, institutions and traders also exchange currencies for investment or trading purposes.
All of that activity creates the foreign-exchange market.
What is a Forex trader doing?
A trader is taking a view on the relationship between two currencies.
- Buying EUR/USD means expecting EUR to strengthen against USD.
- Selling EUR/USD means expecting EUR to weaken against USD.
The goal is not to guess every move. The goal is to understand the market, manage risk and make decisions with a clear process.
- Forex always compares two currencies.
- A currency pair is a relationship, not a standalone price.
- Price movement is information. It is not a guaranteed signal.