The smallest unit of exchange rate change is a point, that is, the numerical change of the last digit, which is called the exchange rate base point, or "point" for short. Different currencies have different decimal places.

For example: EUR/USD1.2033, with the minimum unit of 0.001;

USD/JPY108.27, and the minimum unit is 0.0 1.

Dissemination:

In foreign exchange trading, you will see quotations on both sides, and the price difference is expressed by the difference between the buying price and the selling price. The bid price represents the price at which you can buy the base currency (and sell the non-base currency at the same time); The selling price represents the price at which you can sell the base currency (while buying non-base currency). The difference between the bid price and the bid price is the spread, which is the profit that traders get through the bid-ask spread.

For example, the spread between Euro and USD 3 can be expressed as1.2033/1.2036;

The spread of USD/JPY 3 can be expressed as 108.27/ 108.30.

From the perspective of investors, the spread is the transaction cost, and the smaller the spread, the better for investors. Generally speaking, the spread of a highly liquid currency is smaller than that of a less liquid currency.

You may also have heard of "fixed spread" and "floating spread". Next, here we will explain what they are and tell you how they are calculated.

The change in value between two currencies is expressed by unit measurement, which is called "price difference".

If the euro/dollar interest rate moves from 1.2033 to 1.2034, this is a basic point.

USD/JPY, the trend of one basis point should be 108.27 to 108.28.

Floating spread: the decimal places of some brokerage quotation currencies exceed the standard "4 and 2" to reach "5 and 3". For example, if EUR/USD moves from 1.20332 to 1.20333, it is a floating spread.

Point value:

1. Calculate the point value of the direct currency pair:

Calculation formula: integral value = number of trading lots x number of base points.

For example, the contract of 65438+ million pounds is a standard hand.

1 point value =100000x0.0001= 65438 USD +00 USD.

Calculate the profit and loss of the straight plate.

2. Calculate the point value of foreign exchange pair on the cross panel:

In the cross panel, if we want to calculate the value of a point, we must add a step.

Calculation formula: integral value = number of hands x basis point x exchange rate between base currency and US dollar/current foreign exchange rate.

For example, buy a contract of 100000 euros against the pound at 0.7325, and the exchange rate in Europe and America is 1.0964.

1 point value =100000x0.0001x1.0964/0.7325 =14.96 $.

This is also why when the cross-profit 100 points, why the profit earned is different from the straight one.

Knowing the point, the spread and the point value, you will think, "Do I need to count all these when I make a transaction?" No, all foreign exchange dealers or trading platforms will automatically calculate. Although it is not necessary for traders to calculate, it is something that every trader must understand and master. Because it is the most basic knowledge in all foreign exchange transactions.

I hope I can help you. If you know more about foreign exchange, you can trust me privately.

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