Cross Rates
These are basically the exchange rate of two currencies when the USD is not involved. There are times when a person may want to trade a currency against another currency but the currency pair is not offered through the FDM. In these instances, a trader wishing to execute such a trade will need to do so by making a trade in the middle. This practice is called a cross trade (the exchange rate on a cross trade is referred to as cross rates). Cross trades take place automatically through your FCM/FDM, and some are quoted automatically.
Common Crosses are:
- CHF/JPY
- EUR/GBP
- EUR/JPY
- EUR/CHF
→ EXAMPLE:
If someone in the US wants to make a EUR/JPY trade and it is not available at the FDM the trader will need to:
Buy USD/JPY
Then buy EUR/USD
For more information, please see: http://www.forexrealm.com/forex-articles/cross-rates-pips.html
Study Guide >> Definitions and Terminology >> Cross Rates
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