Trading Currencies
Forex trading is always done in pairs, and the exchange rate depicts the value of one currency in relation to another. Every time you make a transaction, you are dealing with both component currencies. When you trade a particular exchange rate, you are essentially buying one currency and selling the other currency in that pair, at the same time. Think of it as a seesaw. By trading one currency in one direction, you are simultaneously trading the other in the opposite direction.
In Forex trading, every quotation you receive from your broker is a ratio of the two currencies in the pair. The first currency in the symbol is the base currency and the second currency is the quote currency. For example in the pair GBPJPY, the Sterling Pound is the base and the Japanese Yen is the quote currency. If the quotation is 132.48, it signifies the value of one Sterling Pound in Japanese Yen.
If you feel positive about the Yen in relation to the Pound, you would sell the GBPJPY pair. By doing so, you are selling the GBP, and simultaneously buying the JPY. If your prediction is correct, you should be able to see the rate go down below 132.48.