We have divided this program into six modules:
- The fundamentals of foreign currency exchange rates;
- How foreign currencies are quoted and priced;
- How much it costs to trade foreign currencies;
- How to calculate profits and losses;
- How leverage works; and
- The risks of forex trading.
You can view any module at any time by clicking on the module
number in the right-hand column. We estimate that it will take you
approximately 45 minutes to complete the program.
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To help you understand the language of forex trading, we have
developed a complete Forex Glossary of Terms. You can view this glossary
at any time during the program by simply clicking on the “Glossary of
Terms” button in the upper right portion of the screen.
We have also prepared three short quizzes throughout the program
to help you review what you have learned. Each quiz consists of three
questions with multiple choice answers. Just read the question, identify
the correct answer and click the Next button.
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What are foreign currency exchange rates?
Let’s start with a definition of foreign currency exchange
rates. Simply put, foreign currency exchange rates are what it costs to
exchange one country’s currency for another country’s currency. For
example, if you go to England on vacation, you will have to pay for your
hotel, meals, admissions fees, souvenirs and other expenses in British
pounds. Since your money is all in US dollars, you will have to sell
some of your dollars to buy British pounds.
Let’s assume that you have decided to take a trip to England.
Before you leave, you go to your bank and buy $1,000 worth of British
pounds. If you get 565.83 British pounds (£565.83) for your $1,000, each
dollar is worth .56583 British pounds. This is the exchange rate for
converting dollars to pounds.
After spending a few days in England, you realize that £565.83 won’t be
enough to cover all of your expenses. So you go to a bank in England and
buy another $1,000 worth of British pounds. This time, however, you get
only £557.02 for your $1,000. The exchange rate for converting dollars
to pounds has dropped from .56583 to .55702. This means that US dollars
are worth less compared to the British pound than they were before you
left on vacation.
When you arrive home, you still have some British pounds left.
So you go to your bank and use your remaining £100 to buy US dollars. If
the bank gives you $179.31, each British pound is worth 1.7931 dollars.
This is the exchange rate for converting pounds to dollars.
But what if you were traveling to France? The currency used in
France is the Euro. If you go to your bank and buy $1,000 worth of Euros
with an exchange rate of 0.8064, how many Euros will you get? When you
think you know the answer, click Next.
Exchanging $1,000 for Euros with an exchange rate of 0.8064 means you will
receive 806.40 Euros. Conversely, if you were living in France and planned a
vacation in the United States, you would go to your bank to buy US dollars with
Euros.
If the exchange rate was 1.2403, how many U.S. dollars would you get for your
1,000 Euros? When you think you know the answer, click Next.
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