Come back to few years ago.
Then, whenever someone wanted to change currencies, they would first have to convert their currencies into U.S. dollars, and only then could they convert their dollars into the currency they desired.
Warning: This may be appeared a little boring part you have ever learn to the lesson …if you do not like numbers. It’s not difficult but it can be kind of dry. The good news is that this section really isn’t necessary anymore since most broker platforms already calculate cross rates for you.
That’s all, now, if you are the type that likes to know how everything works, then this section is for you! And besides, it’s always good to know how things work right? In this section, we will show you the way calculate the bid (buying price) and ask (selling price) of a currency cross.
Now, come to say, “we want to find the bid/ask price for GBP/JPY”. The first thing we would do is look at the bid/ask price for both GBP/USD and USD/JPY.
Why are these 2 pairs?
The reason is………. both of them have the U.S. dollar as their common denominator.
The 2 pairs are called the “legs” of GBP/JPY because they are the U.S. dollar pairs associated with it.
Now let’s say we find the following bid/ask prices:
GBP/USD: 1.5630 (bid) / 1.5635 (ask)
USD/JPY: 89.38 (bid) / 89.43 (ask)
You need to simply multiply the bid prices for GBP/USD and USD/JPY if you want to calculate the bid price for GBP/JPY,
If you found 139.70, good job! Your calculator has done properly, yipee!
If you want to find the ask price for GBP/JPY, you need just to multiply the ask prices for GBP/USD and USD/JPY and we get 139.82. Easy as pie!
Then, whenever someone wanted to change currencies, they would first have to convert their currencies into U.S. dollars, and only then could they convert their dollars into the currency they desired.
For example, if a person wanted to change their U.K. sterling into
Japanese yen, they would first have to convert their sterling into U.S.
dollars, and then convert these dollars into yen.
Whenever the currency crosses invented, individuals can now bypass
the process of converting their currencies into US dollars and simply convert
it directly into their desired currency. Some examples of crosses include:
GBP/JPY, EUR/JPY, EUR/CHF, and EUR/GBP.Calculating Currency Cross Rates
Warning: This may be appeared a little boring part you have ever learn to the lesson …if you do not like numbers. It’s not difficult but it can be kind of dry. The good news is that this section really isn’t necessary anymore since most broker platforms already calculate cross rates for you.
That’s all, now, if you are the type that likes to know how everything works, then this section is for you! And besides, it’s always good to know how things work right? In this section, we will show you the way calculate the bid (buying price) and ask (selling price) of a currency cross.
Now, come to say, “we want to find the bid/ask price for GBP/JPY”. The first thing we would do is look at the bid/ask price for both GBP/USD and USD/JPY.
Why are these 2 pairs?
The reason is………. both of them have the U.S. dollar as their common denominator.
The 2 pairs are called the “legs” of GBP/JPY because they are the U.S. dollar pairs associated with it.
Now let’s say we find the following bid/ask prices:
GBP/USD: 1.5630 (bid) / 1.5635 (ask)
USD/JPY: 89.38 (bid) / 89.43 (ask)
You need to simply multiply the bid prices for GBP/USD and USD/JPY if you want to calculate the bid price for GBP/JPY,
If you found 139.70, good job! Your calculator has done properly, yipee!
If you want to find the ask price for GBP/JPY, you need just to multiply the ask prices for GBP/USD and USD/JPY and we get 139.82. Easy as pie!
No comments:
Post a Comment