Forex or foreign exchange trading is a global marketplace where currencies are exchanged. It is considered as the largest financial market in the world and operates 24 hours a day. The forex market is highly volatile, with exchange rates fluctuating continuously. The exchange rate between two currencies is the amount of one currency that can be exchanged for another currency.
In forex trading, currency pairs are traded, where one currency is bought and the other is sold simultaneously. The exchange rate of a currency pair indicates how much of the quote currency is required to buy one unit of the base currency. For example, in the USD/JPY currency pair, the exchange rate indicates how many Japanese yen are required to buy one US dollar.
The exchange rate is affected by various factors, such as economic indicators, political events, and market sentiment. Traders analyze these factors to forecast the future exchange rate and make profitable trades.
Now, coming to the question of why is $10 1.0 in forex, it is important to understand the concept of pip. Pip stands for “percentage in point” or “price interest point”. It is the smallest unit of measurement in forex trading, and it represents the fourth decimal place in most currency pairs. For example, in the USD/JPY currency pair, if the exchange rate changes from 110.00 to 110.01, it means there has been a change of one pip.
In some currency pairs, such as the USD/JPY, the exchange rate is quoted with two decimal places. In such cases, the pip is the second decimal place. For example, if the exchange rate changes from 110.00 to 110.10, it means there has been a change of 10 pips.
Now, coming back to the question, why is $10 1.0 in forex? The answer lies in the currency pair being traded. In some currency pairs, such as the USD/JPY, the quote currency is the Japanese yen, and the base currency is the US dollar. In such cases, the exchange rate is quoted with two decimal places, and the pip is the second decimal place.
So, if the exchange rate of the USD/JPY currency pair is 110.00, it means that one US dollar can be exchanged for 110 Japanese yen. Now, if the exchange rate changes to 110.01, it means that the exchange rate has increased by one pip.
If a trader wants to buy $10 worth of Japanese yen at an exchange rate of 110.00, he will receive 1100 Japanese yen. Now, if the exchange rate changes to 110.01, the trader can sell the Japanese yen and receive $10.01, which is a profit of one cent. This is why $10 1.0 in forex, as it represents the profit or loss of one pip in the USD/JPY currency pair.
In conclusion, the exchange rate in forex trading is affected by various factors, and traders analyze these factors to forecast the future exchange rate and make profitable trades. The pip is the smallest unit of measurement in forex trading, and it represents the fourth decimal place in most currency pairs. In some currency pairs, such as the USD/JPY, the exchange rate is quoted with two decimal places, and the pip is the second decimal place. Hence, $10 1.0 in forex represents the profit or loss of one pip in the USD/JPY currency pair.
