Currencies

Contributors: Colton, mikea

Currencies

Obviously, there is a lot that can be said about currencies. We’ll just cover some of the basic concepts of currencies as they exist in the modern marketplace: A currency is the standard unit for transactions in a country.

The United States use US Dollars, Japan uses Yen, Germany uses Marks, etc. If you travel to another country, you will need to change your currency into the local country’s currency to be able to pay for things; however, you will not get one US Dollar for one Japanese Yen. There is an exchange rate involved. One U.S. Dollar may cost 80 Japanese Yen. This may seem like a strange number until you notice that something that costs about $2 in the United States will cost about ¥160 in Japan. So who determines what the exchange rate is? In many ways, we all do.

If the US economy is not valued in peoples’ minds, a Japanese person may say “I won’t pay 80 Yen for 1 US Dollar. I will only pay 75.” If the bank can’t sell 1 US Dollar for 80 Yen anymore, they will have to reduce the price to 75 Yen. In this way, the value of currencies is constantly changing with the world economy. The exchange rate is even changing by tiny fractions every few seconds. Every government also has a central bank which is able to create and destroy their own money.

Creating too much of a currency causes it to become less valuable and can lead to inflation. Destroying too much means other banks have less to work with, so they must raise their interest rates for loans to compensate. This can hurt the economy as people will be less likely to buy things. The central bank is tasked with the balancing act of keeping the currency stable. (for more info, see How can we use all of this to our advantage? If you speculate that the currency your money is in will become less valuable or that another currency will become more valuable, you can convert what you have into another currency. If the exchange rate changes like you though it would, you can then buy your currency back and get more of it.

 
Term Updated
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Ascending Triangle 2012-9-13
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Base Currency 2012-10-15
Bearish Breakdown 2012-10-10
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Benjamin Formula 2013-10-3
Black Box 2012-10-15
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Bullish Pullback 2012-9-18
Bulls and Bears 2012-9-13
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CAD (Canadian Dollar) 2012-10-12
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Consolidation 2012-10-10
Continuation 2012-9-14
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Cup and Handle 2012-10-10
Currencies 2012-10-10
Custom Indicators 2012-10-18
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Demo Account 2012-10-11
Derivative 2016-4-8
Descending Triangle 2012-10-11
Divergence 2012-10-11
Diversification 2012-9-10
Doji 2012-10-11
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ECN (Electronic Communications Network) 2012-10-11
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EMA (Exponential Moving Average) 2012-10-11
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Gap 2012-9-12
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GDP (Gross Domestic Product) 2012-10-12
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Grey Box 2012-10-12
GTC (Good Til Cancel) 2012-10-12
Hard Currency 2012-10-12
Head and Shoulders 2012-9-18
Hedging 2012-10-12
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Hyper-Diversification 2012-10-12
Hyperinflation 2012-10-12
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Interest Rates 2012-10-15
Intermarket Analysis 2012-10-15
Intervention 2012-10-15
Investor Profile 2012-12-6
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Keltner Channel 2012-10-15
Key Currency 2012-10-15
Kiwi 2012-10-15
Leverage 2012-10-15
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MACD (Moving Average Convergence Divergence) 2012-10-15
Majors 2012-11-21
Market History 2012-11-13
Market Maker 2012-10-2
Martingale 2012-11-21
MetaStock 2012-11-21
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Micro 2012-11-21
Mini 2012-11-21
Minors 2012-11-21
Momentum 2013-12-31
Momentum (indicator) 2012-11-21
Momentum Burst 2012-11-21
Moving Average 2012-11-21
Multiple Time Frame Analysis 2012-11-21
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NZD (New Zealand Dollar) 2012-11-21
OCO (One Cancels Other) 2012-11-21
OHLC (Open High Low Close) 2012-11-21
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Outside Reversal 2012-11-22
Overextension 2012-11-22
Pairs 2012-11-22
Paper Trading 2012-9-13
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Parity 2016-4-18
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Pending Order 2017-1-24
Pennant 2012-11-26
Pip 2014-12-11
Pivots 2012-11-26
Platform 2012-11-26
Players in the Forex Market 2012-11-26
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Range 2012-11-29
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Risk 2013-1-4
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ROI (Return On Investment) 2013-1-4
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Spread 2013-6-27
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Symbology 2013-6-27
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