Lesson 2 Flashcards
What is the FX Geek Speak for EUR/USD
“euro dollar”
What is the FX Geek Speak for USD/JPY
“dollar yen”
What is the FX Geek Speak for GBP/USD
“pound dollar”
What is the FX Geek Speak for USD/CHF
“dollar swissy”
What is the FX Geek Speak for USD/CAD
“dollar loonie”
What is the FX Geek Speak for AUD/USD
“aussie dollar”
What is the FX Geek Speak for NZD/USD
“kiwi dollar”
The most actively traded crosses are derived from the three major non-USD currencies:
EUR, JPY, and GBP.
What is the name of Sweden’s currency?
krona
Pronounced as “KROH-nah”
What is the name of Sweden’s currency in plural form?
kronor
Pronounced as “KROH-noor”
What is the 3 code for Sweden’s currency ?
SEK
What is the nick name for Krona?
stockie
What is the name of Norway’s currency?
krone
how to pronounce Norway’s currency?
Like The sweden currency, it is pronounced as “KROH-nuh”
What is the three letter code for Norway’s currency?
NOK
What is the nick name for Krone?
nockie
What are Euro Crosses?
EUR/CHF
EUR/GBP
EUR/NOK
EUR/SEK
EUR/CAD
EUR/AUD
EUR/NZD
What are Yen Crosses?
EUR/JPY
GBP/JPY
CHF/JPY
CAD/JPY
AUD/JPY
NZD/JPY
What are Pound Crosses?
GBP/CHF
GBP/AUD
GBP/CAD
GBP/NZD
What are Other Crosses?
AUD/CAD
AUD/NZD
AUD/CHF
CAD/CHF
NZD/CHF
NZD/CAD
Give 5 examples of emerging economies (Exotic Currencies)
Brazil, Mexico, Chile, Turkey, or Hungary.
Keep in mind that Exotic pairs aren’t as heavily traded as the “majors” or “crosses,” so the transaction costs associated with trading these pairs are usually …………….
bigger
What does bidding mean?
Bidding means offering a price to buy something.
What is the Buying Price (Ask Price)?
This is the price at which you can purchase a currency from the market. It’s the price the seller is asking for.
What is Selling Price (Bid Price)?
This is the price at which you can sell a currency to the market. It’s the price the buyer is willing to pay.
What is the spread?
In the FX market, the spread is the difference between the buying price (ask price) and the selling price (bid price) of a currency pair. It’s like the markup a currency dealer charges for their service. For example, if a currency can be bought for $1.20 and sold for $1.18, the spread is $0.02. This small difference is how brokers make money on each trade.
………………… Indicates low cost to trade and high liquidity. Easier and cheaper to buy and sell currency pairs.
Small Spread
……………Indicates high cost to trade and low liquidity. More expensive and harder to buy and sell currency pairs.
Big Spread
High volume of trades ensures prices stay competitive which leads to small spread. Why?
Increased Competition: With many buyers and sellers in the market, they compete to offer the best prices. Buyers compete to pay slightly more to ensure their orders are filled, and sellers compete to accept slightly less to quickly sell their currency. This competition narrows the gap between the bid and ask prices, reducing the spread.
Due to the overall lower degree of liquidity, exotic currency pairs tend to be far more sensitive to economic and geopolitical events. (Part 1)
Imagine two markets: one for apples and one for rare exotic fruits.
Apple Market (Major Currencies):
Many people buy and sell apples every day.
If a farmer suddenly brings in a large batch of apples (an economic event), there are enough buyers and sellers to handle this change smoothly.
Prices might drop a little due to the surplus, but because many people are constantly trading apples, the price quickly stabilizes.
Exotic Fruit Market (Exotic Currencies):
Few people buy and sell these rare fruits.
If a rare fruit suddenly becomes available in large quantities (an economic event), there aren’t enough buyers and sellers to quickly handle this change.
Because the market is small, this big change causes prices to swing wildly – either dropping a lot if there’s a surplus or rising sharply if there’s a shortage.
Due to the overall lower degree of liquidity, exotic currency pairs tend to be far more sensitive to economic and geopolitical events. (Part 2)
Connection to Currency Trading:
Major Currencies:
These currencies (like USD, EUR) are traded in high volumes. Many buyers and sellers are always active.
When news or events happen, the impact is spread out across many trades. This means any price change is moderated by the sheer volume of trading activity.
Example: A new economic policy in the US might cause the USD to change slightly, but because millions of trades happen daily, the price change is absorbed and stabilized quickly.
Exotic Currencies:
These currencies (like TRY, ZAR) are traded in lower volumes. Fewer buyers and sellers are involved.
When news or events happen, the impact is concentrated because there aren’t many trades to buffer the change.
Example: A political event in Turkey might cause the TRY to change drastically because there aren’t many trades happening. Each trade has a larger impact on the overall price, leading to bigger swings.
A Trading process consist of three parts, what are they?
Traders, Currencies, and Prices
Why Many Trades can Absorb Impacts?
1 - Spread of Impact
2 - Stability
3 - Liquidity
Spread of Impact: In markets with high trading volumes, any single trade has less impact on the overall price because it’s …………………………
one of many
Stability: High trading activity means there’s always someone willing to buy or sell ……………………, preventing large price jumps.
at or near the current price (Traders)
Liquidity: With more trades, there’s more liquidity, meaning ………………… can be bought or sold quickly without drastically changing the price.
assets (currencies)
What is the name of Denmark’s currency?
krone
how to pronounce Denmark’s currency?
Like The sweden currency, it is pronounced as “KROH-neh”
What the three letter code for Denmark
DKK
