Forex Primer Questions

[James_Khan]

Hi everyone
I was going through the Forex Primer Seminars, I'm currently at the 2nd seminar,"Forex lowdown." So I have been trying the howework questions, however, i have had some difficulty with the following question:


Forex Lowdown
Question 4

Suppose The AUD/USD price chart is fallling. What should you do on the pair to make a profit- buy or sell? What does that imply you are doing with the qoute currency?

Your assistance with this question will be greatly appreciated. thnx

[Dennis Carr]

Hello James
The question is asking you whether a buy position or a sell position would make a profit on a falling pair.
The second part of the question is asking what you implicitly do with the quote currency when you buy the base currency.

Does that help?

[CharlieM]

Hi James,

I wasn't sure if you needed assistance with answering the questions or needed the questions clarified.
Let us know if you need help with the answers otherwise Dennis should have made the question clearer for you.

[James_Khan]

hey guys,
thanks, for making the question alot clearer for me. However, ur assistance with a solution and reason for your solution will help a great deal, as i am unsure how to go about reasoning out a solution. Thanx for the assistance.

[Dennis Carr]

Forex Lowdown
Question 4

Suppose The AUD/USD price chart is fallling. What should you do on the pair to make a profit- buy or sell? What does that imply you are doing with the qoute currency?

A currency pair is made up of two currencies. The first currency is the base currency and the second currency is the quote currency. When you open a long (buy) position on a pair you are buying the base currency with the quote currency. Likewise, when you go short, you are selling the base currency for the quote currency.

A price chart shows the price of the base currency in terms of the quote currency. When the chart is rising, the base currency is getting more valuable in terms of the quote currency and vice-versa.

So if the AUD/USD price chart is falling, AUD is losing strength against USD and a SELL position would be making a profit.

When you sell AUD/USD, it means that you are selling AUD for USD and this implies you are buying USD.

[CharlieM]

Suppose The AUD/USD price chart is fallling.

This happens when the USD (or simply dollar) gains strength (i.e. increases in value). It's like fractions, the base currency is the numerator and the quote currency is the demoninator.

What should you do on the pair to make a profit- buy or sell?

You should sell the pair (trading lingo = "short" the Aussie)

What does that imply you are doing with the qoute currency?

You are buying the quote currency.
Because the dollar is the quote currency in this pair and it is strengthening you'd wanna buy it.

OOPS, just noticed Dennis' post but since I already typed this up I didn't wanna delete it.

[James_Khan]

Hi Dennis, Hi Charlie

Thanx for the solution, with the explanation,....but while we are on lesson 2,..i was wondering if a simplistic price chart of the AUD/USD..would look like this:

AUD/USD(vertical axis)
|
|
|
|
|
|
|_________________
USD(horizontal axis)

Oh for question 2,..in lesson two...i did the following

(GBP/USD) * (USD/CHF) = GBP/CHF = 1.8744 * 1.2457 = 2.3349


thats all for now guys, thanks again for the assistance,..im off to lesson 3,...so look out i'm coming with more questions:)

[CharlieM]

I tried putting *s going from top left to bottom right of your graph but instead it appears like this.

AUD/USD(vertical axis)
^
|*
| *
| *
| *
| *
| *
--------------------->
USD(horizontal axis)

The *s would show the inverse relationship between the price of a currency pair and its' quote currency.

AUD/USD(vertical axis)
^
|
|
|
|
|
|
--------------------->
Time (horizontal axis)

It may be a little confusing calling the simplistic chart a "price chart" because price charts are plotted against time.

[James_Khan]

Hey thanx, Charlie for the explanantion. However im now on lesson three.
was wondering if i cud get some assistance with question 2:

2.) You have $1000 in your account. You have an opening position on GBP/JPY lot size 10000. If you close it now, your profit will be $50.
Can yout open 2 new postitions on USD/CHF and USD/JPY with a combined worth of $20000,$100000, $70000 without closing your current position?



Not sure how to go about constructin my solution...,..can i get assistance with understanding the question, and formulating a solution, please?

[Dennis Carr]

Hello James

Here's a hint: check out the Forex Club rules about leverage on this site.;)

[Dennis Carr]

I am bumping this Forex Primer thread. If you have any questions about Forex Clubs email seminars, please ask them here.

If you would like to subscribe to Forex Primer, go to

http://www.fxclub.com/private-zone-en/

sign up to become a member and then subsribe to Forex Primer in the member zone.

All the best

[Dennis Carr]

Heres a quick rundown of the content of each lesson:

Lesson 1: All you need is… This lesson looks at the reasons why you might want to get into Forex trading and sets out the aims of Forex primer.
Lesson 2: Forex lowdown This lesson gives a brief history of the Forex market; it identifies the main market players; it looks at the working hours of the market and discusses Forex conventions like currency pairs, prices and points.
Lesson 3: Leverage (a little help from your friends) This lesson discusses leverage and its benefits and dangers.
Lesson 4: Forex trading with Rumus2 This lesson introduces the reader to Rumus2 and shows how you can use this trading platform to open and close positions, receive a trading report and access Dow Jones news services.
Lesson 5: Orders This lesson discusses how to use the different types of orders and how to place these orders with Rumus2.
Lesson 6: A beginner’s guide to technical analysis This lesson looks at the advantages of different types of price charts and talks about trend lines, support and resistance and channel lines. It also gives a very basic introduction to charting.
Lesson 7: Technical indicators This lesson looks at the significance of the four key prices. It discusses simple moving averages (SMA) and exponential moving averages (EMA) and explains how to use moving averages. It then goes on to discuss oscillators, namely RSI and Stochastic and makes some suggestions how to exploit oscillators.
Lesson 8: Fundamental analysis This lesson explains what fundamental analysis is and how the financial news can affect currency rates.
Lesson 9: Trading psychology This lesson discusses how our emotions can have a negative impact on our trading and what we can do to minimize this negative impact.
Lesson 10: A simple trading system This lesson looks at what trading system in general offer the trader. Lesson 10 also gives the reader a rudimentary trading system to illustrate what trading systems should contain and to allow the reader to experiment with assessing a trading system.

Each lesson has a homework task which we could discuss together on this forum. The lessons are free, of course, and if you sign up for them you will receive one lesson every day (or every two days). I really think that they will be very useful for someone who is new to trading. At the risk of blowing my own trumpet, I think they are well-written and would be interested in any feedback (positive or negative) on either content or style.

I hope you give them a go.

[Dennis Carr]

Hello
You can find the answers to the homework tasks in Forex Primer at

Forex Primer Homework Answers (http://www.coltfx.com/forum/showthread.php?t=78)