Hi all, I am currently educating myself on this site and have become stuck at this point: School of Pipsology > Preschool > How to make money trading forex
I fully understand the second part of the statement below but cannot get my head around the first part:
For example, the USD/CHF exchange rate indicates how many U.S. dollars can purchase one Swiss franc, or how many Swiss francs you need to buy one U.S. dollar.
I understand that if USD/CHF = 0.95 then $1 is worth 0.95 CHF / I pay 0.95 CHF to buy $1 / selling 0.95 will get me $1 but how does USD/CHF indicate “how many U.S. dollars can purchase one Swiss franc?”
The answer is probably staring me in the face but its annoying me that I can’'t grasp this, can someone please explain this for me?
Cheers! You’re in the right place to ask anything here. I just finished PreSchool few days back. But looking at your question, I can say that you might be weak in maths right?
Say USD/CHF = 0.95
This represents 1 USD = 0.95 CHF.
Now you’re asking the opposite, how much dollar in one CHF, so
1 CHF = 1/0.95 USD = 1.0526 USD
To purchase 1 CHF, you need to sell 1.0526 USD.
In trading practice, when you want to purchase or buy Swiss Franc CHF, it basically means you want to sell (or short) USD/CHF.
In general, if you want to calculate the opposite in the given pair, just solve 1 divide by exchange rate.
Easy? Hope you’re having good journey in Pipsology.
Great. Forex is a whole lot about numbers, need quick decision, so I think maths is the basic foundation to enter Forex. You don’t need to go to whole parts of maths, instead be strong in understanding these three parts, “Simplicity”, “Percentage”, “Profit & Loss”. I think these three are very important enough for trading.
Also practice some shortcuts of approximation in multiplication and division.