forex currency code

There are a lot of currencies in the world. A few have special symbols to represent them but most use the first letter of the currency name.

Although there are special symbols for some currencies sometimes it is difficult to use them in e-mail, news postings or on web pages. For this reason we need a method of representation that passes unchanged and without difficulty in all of these media.The solution, long used by the international banking community, is the ISO 4217 set of currency abbreviations.

ISO 4217

ISO 4217 (Codes for the Representation of Currencies and Funds) defines three-letter abbreviations for each world currency. The general principle used to construct these abbreviations is to take the two-letter abbreviations defined in ISO 3166 (Codes for the Representation of Names of Countries) and append the first letter of the currency name (e.g., USD for the United States Dollar).

In the case of currencies defined by supra-national entities, ISO 4217 assigns two-letter entity codes starting with "X" to use in place of country codes (e.g., XCD for the Central Caribbean Dollar). Codes beginning with "X", among others, are reserved for special purposes. For example, XAU is used to indicate the "exchange rate" for gold (usually USD per ounce), and XPD, XPT and XAG correspond to palladium, platinum and silver, respectively (the pattern here being that the last two letters correspond to the atomic symbol of the chemical element). XDR refers to the International Monetary Fund's Special Drawing Rights. Other codes are used, for example, for specific currency trading purposes, such as USN for United States dollar (next day), and USS for United States dollar (same day).

Using of Currency Abbreviations

Depending upon whether you are using e-mail, news or the web, some currency symbols may be used but many others should not be used. The long answer is rather complicated. The short answer is: In e-mail and news, the only currency symbol that may safely be used is $ (the dollar symbol). To express a value in any other currency you should use the ISO 4217 three-letter currency abbreviation.

Common Currency Abbreviations

The currency abbreviations that are most commonly seen, and required in E-mail and news, are those which have symbols in the ISO 8859/1 (Latin 1) character set. These are:

USD - United States Dollar ($). The only currency symbol that can safely be used in E-mail and news.

GBP - Pound Sterling [United Kingdom Pound]

ITL - Italian Lira

JPY - Japanese Yen

Changing Countries and Currencies

The world is in constant flux.Countries change their names or split into two or more smaller countries or merge with another country. Some "countries" given country codes by ISO 3166 are colonies or dependencies of other countries.

Currencies are revalued without a change of name or revalued with a change of name or change name without being revalued. Countries may adopt the currency of another country or stop using the currency of another country and create their own currency. In some countries other currencies, besides the official currency, circulate and are accepted.

Some countries (mainly colonies and dependencies of other countries) have currencies which are theoretically different from their parent country but which are actually pegged at a 1:1 exchange ratio. All that really changes is the wording and pictures on the banknotes. E.g., the Falkland Pound (FKP) is theoretically a different currency to the Pound Sterling (GBP) but in practice is pegged at a 1:1 exchange ratio.

In these pages, currencies are listed against a particular country where they circulate, whether those currencies are the official currency of a country or whether they are unofficially acceptable. Because of transitions from one currency to another, currencies are also listed against a particular country if they have circulated in that country in the recent past.

The following European Union countries adopted the Euro at the start of 2002: Austria, Belgium, Finland, France, Germany, Greece, Italy, Ireland, Luxembourg, The Netherlands, Portugal and Spain. Other countries which were previously using one of the superseded currencies also adopted the Euro.

Thus here you can find the list of currency names, the ISO 4217 alphabetc and numeric codes, the symbol and the subdivision for most countries and territories. The list is not official, and the fact that a currency is listed as being used in a certain region does not mean that the currency is an official currency for that country (although it usually is). Some currencies circulate and are acceptable in some countries even though they are not the official currencies of those countries.

forex orders

Forex trading goes on for 24-hour a day, so how can you protect your positions when you are away from your screen?

There are a variety of automated orders that can be triggered at pre-set exchange rates and that can be deployed to control the downside and consolidate the upside.

Limit order

An order to buy or to sell at a specified price. A buy limit order can only be executed at the limit price or lower (better), and a sell limit order can only be executed at the limit price or higher (better). If you placed a buy limit order, the fill price would be at your limit price of better, meaning that it would be better to buy at a lower price compared to the submitted limit price. It would be better to sell at your limit price or better, meaning selling at a higher price.

In other words, Limit Order is an order to buy or sell at a certain limit. They can be used to buy currency below the market price or sell currency above the market price. When buying, your order is executed when the market falls to your limit order price. When selling, your order is executed when the market rises to your limit order price. There is no slippage with limit orders.

Market order

An order to buy or to sell at the current market price. The advantage of a market order: you can almost always expect your order to be executed (as long as there are willing buyers and sellers). The disadvantage: the price you pay when your order is executed may not always be the price you obtained from a real-time quote service or were quoted by a broker.

Market Order is an order to buy or sell at the current market price. They can be used to enter or exit a trade. Market orders should be used with care because in fast-moving markets there may be a difference between the price seen at the time a market order is given and the actual price of the transaction. This is due to slippage the amount the market moves in the few seconds between giving an order and having it executed. Slippage could result in a loss or gain of several pips.

Stop Market order

Buy or sell at market once the price reaches or passes through a specified price. Used by traders who either have a position (long or short) and want to close the position if it moves against them OR by traders who wish to open a new position once the currency rises to a specific level. The stop price on a sell stop must be below the current bid. The stop price on a buy stop must be above the current offer. Stop orders do not guarantee you an execution at or near the stop price. Once triggered, the order competes with other incoming market orders.

Stop Limit order

Works like a Stop Market order with one major exception. Once the order is activated (by the currency trading at or through the stop price), it does not become a market order. Instead, it becomes a limit order with a specified limit price. The advantage of this order is that you set a specified price at which your order can be filled. The disadvantage is that your order may not be filled. In this case, your exposure to loss will continue until the position is closed.

Trailing Stop order

Ride a currency's price trend, profit from its movement, and limit your downside risk without constantly monitoring prices. Trailing stops move your stop price with the price of the currency and are server-sided, protecting you in the event you lose Internet connection.

When using the trailing stop, it is important to know the answer to the question: How do you represent a pip per currency pair? A pip is the last digit to the right of the decimal point in the current currency dealing rate.

Threshold Triggered Order (TTO)

Specify two prices, an upper and lower price trigger. Once the market trades at either price, a market order is sent to the marketplace. This order type was designed to help limit potential losses and lock-in potential profits.

One Cancels the Other (OCO)

This order is used when placing a limit order and a stop-loss order at the same time. If either order is executed the other is cancelled, allowing the trader to make a transaction without monitoring the market. If the market falls, the stop-loss order will be executed, but if the market rises to the level of the limit order, the currency will be sold at a profit.

"Combo" Order Types

A combo order involves a combination of two different order types. Whatever the action of the first part of the combo order is (either buy or sell), the trading system will send out an opposite order when the first part receives an execution. If we place a buy Market + TTO, the system will send out a market order to buy, and upon execution of that buy market order the system will send out an auto-closing sell TTO. This explanation would be the exact opposite for a sell market + TTO, first part of the order is a sell, the second part is the buy (to cover).

Limit + TTO

This combo order type will initially place a limit order (either a buy or sell) and upon execution, places an opposite TTO (either a buy or sell). Note: Upon execution of any part of the initial limit order, an equal TTO is placed with your pre-set trigger prices. Please keep in mind that when the system sends out an equal TTO, you have to cancel and replace the TTO to change either the upper or lower trigger. With this being said, it is important to know how to place a stand-alone TTO.

Limit + Trailing Stop

Initially places a limit order on one side (either a buy or sell) and upon execution, places an opposite trailing stop on the other side (either a buy or sell).

Limit + Stop Market

Initially places a limit order on one side (either a buy or sell) and upon execution, places an opposite stop market order for the other side (either a buy or sell).

Market + TTO

Initially places a market order (either a buy or sell) and upon execution, places an opposite TTO (either a buy or sell). Note: Upon execution of any part of the initial market order, an equal TTO is placed with your pre-set stop prices. To change either of your TTO price trigger parameters you must cancel and replace the order. Either the bid or ask price can trigger your upper and lower price triggers. At the time the trigger is met the system sends out a market order.

Market + Trailing Stop

Initially places a market order (either a buy or sell) and upon execution, places an opposite trailing stop (either a buy or sell). Note: Upon execution of any part of the initial market order, an equal trailing stop is placed with your pre-set offset. You must know how to represent the number of pips of your trail offset per currency pair.

Stop Limit + TTO

Initially places a stop limit order (either a buy or sell), which works like a Stop Market order with one major exception. Once the order is activated (by the currency trading at or through the stop price), it does not become a market order. Instead, it becomes a limit order with a specified limit price. Your order fill price will be either at your specified limit price or better. Upon execution of the first part of the combo order, the system will place an opposite TTO (either a buy or sell). To change either of your TTO price trigger parameters you must cancel and replace the order. Note: Either the bid or ask price can trigger your upper and lower price triggers. At the time the trigger is met the system sends out a market order.

Stop + TTO

Initially places a stop market order (either a buy or sell) and upon execution, places an opposite TTO (either a buy or sell). Note: Upon execution of any part of the initial stop order, an equal TTO is placed with your pre-set stop prices. To change either the upper or lower trigger you must cancel and replace the TTO. To change either of your TTO price trigger parameters you must cancel and replace the order. Note: Either the bid or ask price can trigger your upper and lower price triggers. At the time the trigger is met the system sends out a market order.

Stop + Trailing Stop

Initially places a Stop Market order (either a buy or sell) and upon execution, places an opposite Trailing Stop order (either a buy or sell). Note: You must know how to represent the number of pips of your "trail offset" per currency pair. At the time you place a buy Stop + Trailing stop you would enter your desired stop price to enter the position. When this buy stop price is reached by the market (in this case the ask) a market order to buy will be triggered. Upon execution of this first part of the combo order the system will send out an auto-closing trailing stop (reflecting the trailing offset you selected when first placing the order).

forex quotes

We know that the FX market is the largest in the world and that your broker or institution that you are trading with is collecting quotes from a centralized feed or individual quotes comprising of interbank rates.

So how are these forex quotes made up? Well, as we previously mentioned currencies are traded in pairs and are each assigned a symbol. For the Japanese Yen it is JPY, for the Pounds Sterling it is GBP, for Euro it is EUR and for the Swiss Frank it is CHF. So, EUR/USD would be Euro-Dollar pair. GBP/USD would be pounds Sterling-Dollar pair and USD/CHF would be Dollar-Swiss Franc pair and so on.

You will always see the USD quoted first with few exceptions such as Pounds Sterling, Euro Dollar, Australia Dollar and New Zealand Dollar. The first currency quoted is called the base currency.

When you see forex quotes you will actually see two numbers. The first number is called the bid and the second number is called the offer (sometimes called the ASK).

If we use the EUR/USD as an example you might see 0.9950/0.9955 the first number 0.9950 is the bid price and is the price traders are prepared to buy Euros against the USD Dollar. The second number 0.9955 is the offer price and is the price traders are prepared to sell the Euro against the US Dollar.

These quotes are sometimes abbreviated to the last two digits of the currency such as 50/55. Each broker has its own convention and some will quote the full number and others will show only the last two.

You will also notice that there is a difference between the bid and the offer price and that is called the spread. For the four major currencies the spread is normally 5 give or take a pip.

To carry on from the symbol conventions and using our previous EUR quote of 0.9950 bid, that means that 1 Euro = 0.9950 US Dollars. In another example if we used the USD/CAD 1.4500 that would mean that 1 US Dollar = 1.4500 Canadian Dollars.

The most common increment of currencies is the PIP.

Currencies in the FOREX market are traded on a price interest point (pip) system. Each currency pair has its own pip value.

Since we have a currency PAIR such as EUR/USD, we need a way to talk about its price value. Whenever you see a FOREX price quote, you will see something listed along the lines of the following:

USD/JPY: 112.46 - Seconds later - 112.51

The first part before the first dash refers to the bid price. In other words it's what you obtain in JPY when you sell USD. In example above, the bid price is 112.46. The second component, which comes after both dashes and usually occurs minutes or seconds later, is used to obtain the ask price, this is what you have to pay in JPY if you buy USD.

In this example, the ask price is 112.51. The difference between the bid and the ask price is called the spread. In the example above, the spread is .05 or 5 pips.

USD/JPY: 123.50

When you see a Forex currency pair price quote, like the one above, just remember that that last digit of the price (after the decimal point) is referred to as the pip. So if you see a quote (118.50) and then a qu.ote in one minute of (118.51), then you should automatically know that the price rose by 1 pip.

Similarly, if you see a price quote of 118.58 and then after 5 minutes it's 118.50, the price dropped by 8 pips. The pip is always the last decimal place of the currency price quote.

In the FOREX market your main objective is to capture as many profitable pips as possible!

In the "Majors", this would include USD/JPY, USD/CHF and USD/CAD. For these currencies and many others, quotes are expressed as a unit of $1 USD per the other currency quoted in the pair such as JPY.

In the example above, a quote of USD/JPY 123.50 means that one U.S. dollar is equal to 123.50 Japanese yen.

When the U.S. dollar is the base unit and a currency quote goes up, it means the dollar has appreciated (become stronger) in value and the other currency has deppreciated (become weaker). If the USD/JPY quote increases to 124.01, the dollar is now much stronger than the JPY because with that same $1 USD you will be able to buy more yen than you could earlier.

Of course there are exceptions to this rule and these are the British pound (GBP), the Australian dollar (AUD) and the Euro (EUR). In these cases, you might see a quote such as GBP/USD 1.4366, indicating that one British pound equals 1.4366 U.S. dollars. These currency pairs are like this because they are stronger than the USD in value.

With these three currency pairs, where the U.S. dollar is not the base rate, a rising quote means that the USD is weakening, because it now takes more U.S. dollars to equal one pound, euro or Australian dollar.

To sum up this point, if a currency quote goes up then it increases the value of the base currency. A lower quote means that the base currency is weakening.

There are some currency pairs that do not involve the U.S. dollar. These currencies are called cross currencies, but the idea is exactly the same. For example, a quote of GBP/JPY 210.95 signifies that one GBP is equal to 210.95 Japanese yen.

Nearly all the brokers you will deal with will work all this out for you. They may have slightly different conventions, but it is all done automatically. It is good however for you to know how they work it out. In the next section we will be discussing how these seemingly insignificant amounts can add up.

In summary, currency traders must become familiar also with the way currencies are quoted. The first currency in the pair is considered the base currency; and the second is the counter or quote currency. Most of the time, U.S. dollar is considered the base currency, and quotes are expressed in units of US$1 per counter currency (for example, USD/JPY or USD/CAD). The only exceptions to this convention are quotes in relation to the euro, the pound sterling and the Australian dollar - these three are quoted as dollars per foreign currency.

Forex quotes always include a bid and an ask price. The bid is the price at which the market maker is willing to buy the base currency in exchange for the counter currency. The ask price is the price at which the market maker is willing to sell the base currency in exchange for the counter currency. The difference between the bid and the ask prices is referred to as the spread.

The cost of establishing a position is determined by the spread, and prices are always quoted using five numbers (for example, 134.85), the final digit of which is referred to as a point or a pip.

forex rate of exchange

A forex rate of exchange is the price of one currency in terms of another currency. It is the means by which banks are able to trade foreign currencies in exchange for Australian dollars.

Banks quote prices at which they will buy and sell foreign currency. These prices are based on prices that are quoted in the major wholesale foreign exchange markets and can change constantly throughout the day, depending on market forces.

Every currency has a unique three-character International Standardization Organization (ISO) code. The ISO codes are based on the 2-letter country code, plus a third character derived from the name of the currency (e.g. GBP represents the Great Britain Pound and USD the United States Dollar)

Every currency pair is expressed as two ISO codes separated by a division symbol (e.g. GBP/USD), the first representing the "base” currency and the second the "quote” currency (also known as "counter" or "secondary" currency).

GBP/USD

Base Currency/Quote Currency

The exchange rate is usually displayed to the right of the currency pair

GBP/USD = 1.6545

This denotes that one unit of the British Pound (the base currency) can be exchanged for 1.6545 US dollars (the quote currency). If you are buying the base currency, it specifies how much you have to pay in the quote currency to obtain one unit of the base currency. If you are selling the base currency, the exchange rate is telling you how much you get in the quote currency for one unit of the base currency.

The smallest increment by which a currency can move is called a “pip” (similar to “point” in equity trading). The last two decimal places measure the pip movement of a currency. For instance, in the example above, 45 represents the pips. If, in the same example, the GBP/USD appreciated to 1.6560, you would say it moved up (or rose) 15 pips. Or, if it depreciated to 1.6541 you would say is fell (or moved down) 4 pips.

There are 3 major groups of factors that influence on exchange rate development:
1) Fundamental Factors

Fundamental trading strategies consist of macro-economic strategic assessments; these criteria often include the economic condition of the currency’s country of origin, the country’s monetary policy, and other "fundamental" elements.

Typically, on the world markets, the US economy has the greatest influence. Fully 80% of financial operations conducted in world markets are transacted in dollars. This causes the dollar rise or fall against all other currencies. The fundamental factors affecting world markets are:

* Gross national product
* The level of real percentage
* The level of unemployment
* Inflation
* An index of industrial production

Therefore, the common rule for a trader is to orient to the expectations and moods of the majority of investors in the market. Exchange rate movement tendency can be analyzed by reading publications, studying reviews of market situation in information systems such as Reuters, Bridge (Dow Jones), and CQG. Following the publication of the leading economic indicators, the market will inevitably begin to move. A trader’s primary task is to participate in such movement, which invariably will be lead by the majority in the market. The axiom is - “don’t miss the boat”.
2) Technical Factors

Technical analysis is a field of market analysis, which supposes that market has a memory and consists primarily of a variety of technical aspects, each of which can be interpreted to generate buy and sell signals or to predict market direction.

During the past few years, in response to rapid growth of electronic analytical devices such as those offered by Reuters, Bridge (Dow Jones), CQG and others, greater numbers of traders make their decisions according to the technical analysis, which regularly increases its influence on any real rate movement.

Technical analysis is a method for price forecasting based on historical market movement studies. For the last 30 years, studies in the field of technical analysis have proven themselves a science with its own philosophical system and set of operative axioms.
3) Aside from the fundamental and technical factors

* Insuperable circumstances – acts of nature (earthquakes, a tsunami, a typhoon, flooding, etc.)
* Political events – war, political scandals, terrorist acts, etc
* Political speeches
* Currency interventions by central banks.

Forex psychology

Forex (or trading) psychology is very difficult but at the same time very important and interesting for study.

As every successful Forex trader knows, it is not enough just to have the technical knowhow of the actual mechanics of trading the Forex (foreign currency exchange) market, but to recognise that to be a winner relies also on the psychology of trading – Forex requires mental discipline.

While the aim is to capture as many Pips (Price Interest Points) as possible, in order to make your profit, your head needs to rule your heart in Forex trading. Don’t get carried away by the thrill and excitement of the moment! Have a plan or strategy in place before you start trading, and predetermine your exit point.

Within the Forex trading experience, you will have losing trades (every Forex trader does). But the art is in knowing when to let go of these, and not hang on in the hope that they will turn around and start making money. Don’t keep lowering your stop-loss order in anticipation of an upturn in the market that may not come for some while, and don’t persist just to try and prove yourself right! Smart traders know there will always be another trade along soon. Equally, know also when to exit from profitable trades.

A golden rule is always to place a stop-loss order, along with every entry order, to prevent any loss from sinking too far. Anyone who doesn’t place a stop-loss order is going to lose probably a lot of money. An acknowledged maxim is to cut your losers, but let your winners ride.

Apply discipline and emotional control when trading, and follow the rules. Try not to be too greedy. While it is great to be passionate about what you do, patience can be a virtue when Forex is concerned. Don’t let your emotions hold sway, and resist the urge to gamble! Have the courage to stick with your plan and stay with the rules. Believe in yourself for that winning system.

Most of all, gain an understanding of the charts, for they represent so much and are relatively easy to interpret and use. Forex trading develops strong trends, and although a more volatile market, predictability is one of the advantages of this market over others such as futures and stocks. Technical analysis is the most precise way of trading Forex, with charts showing the historical data, which over time has patterns repeating themselves, and can be used reliably for predicting future trends.

The key, of course, is recognising these price patterns to know when to place orders in present-day trading. Research has shown that those who trade ‘with the trend’ improve their chances of success. Don’t cloud your mind with non-essentials such as wondering about the reasons for price movements. In other words, if the market trends show your judgement to be correct, stay with the market for the maximum gain, according to your own risk-to-profit boundaries. If the market starts to go against you, take your profits and get out.

It is wise to open a demo account and to practise trading ‘on paper’ first before risking your money. If you’re unsuccessful in this, it is unlikely that you will suddenly become an expert trader in a ‘live’ account, when using your own finances adds to the pressure to succeed. Never risk more money than you can afford to lose.