Forex trading may sound daunting at first,
but the basics are quite simple. To start with, remember that
the first currency listed is called the "base currency."
A base currency is usually the US dollar. People (traders)
will usually pit the USD against another currency –
say, for example, a Japanese Yen.
The American dollar is usually considered
the base currency for quotes. For example, a quote of USD/JPY
2.34 means that one U.S. dollar is equal to 2.34 Japanese
Yen.
When the U.S. dollar is the base unit and
a currency quote goes up, it means the dollar has increased
in value and the other currency has weakened. If, after the
allotted time, the USD/JPY quote is 2.50, then the dollar
is stronger because it can buy more Japanese Yen. There are
exceptions to the rule, such as the British pound (GBP) or
Euro, which would be the base currency if matched against
the US Dollar. In this case the American currency is the "weaker"
one.
To sum
up: if a currency quote goes higher, this increases the value
of the base currency. A lower quote means the base currency
is weakening.
