Jun 022013
 

[simple_series title=”Forex Beginners”]

Before we start to the second session of foreign exchange trading, let’s make a little review about our previous lesson. We have learnt that foreign exchange trading is the real-time transaction of buying and selling of one currency to another. Now, we should learn more about how currencies are traded. Commonly, the Euro is traded with the US Dollar. Yet, there are still some other trading currencies like US Dollar and Japanese Yen, or Australian Dollars and US Dollar. There are some major pairs or currencies which are traded most frequently and most liquid. They include:

Pair

Countries

GBP/USD

United Kingdom / United States

AUD/USD

Australia / United States

USD/JPY

United States / Japan

NZD/USD

New Zealand / United States


You will notice that currency pairs, which do not involve USD are familiar with the terms: cross-currency pairs and they are considered as minors. Yet, other currencies which are mostly traded unless USD include British Pound (GBP), Euro Zone (EUR) Japanese Yen (JPY). Other crosses include :

Pair

Countries

EUR/JPY

Euro zone / Japan

NZD/JPY

New Zealand / Japan

GBP/NZD

United Kingdom / New Zealand

CAD/CHF

Canada / Switzerland

NZD/CHF

New Zealand / Switzerland

EUR/AUD

Euro zone / Australia


The most traded currency is US Dollar which has taken up for more than seventy percent of all currency trading transactions. The second place is Euro which takes up for twenty percent. The rest is Japanese yen and others.

Now, you will be able to see the challenge in which every currency can fluctuate stronger or weaker, based on the country’s economic situation.

Foreign exchange market is different with stock trading in which the spot market of foreign exchange has no central location physically. It is called Over-the-Counter because this activity can be done automatically


within banks network, incessantly 24/7. All traders are able to do transaction without any limit in time and place and they can even do transaction while still wear pajamas! Undoubtedly, foreign exchange trading becomes the largest financial trading market globally as there are millions of people and thousands of organizations involve in it. Forex trading, traders are able to decide whom they are willing to trade with though it depends on the prices allure, conditions of the trading and the trading complement repute.

 

 

Why US Dollar Becomes the Major Trading Currency

Yes, you might have noticed that US Dollar becomes the major currency that any other currency will pair with. Definitely, this is because ever trader always pays attention on the fluctuation of the USD due to some reasons. As we know, the United States has:

  • Well-managed systems in terms of politic, economy and military
  • The strongest financial markets globally
  • A currency that becomes the main exchange for several transactions of cross-border commodities like oil, gold and any other important resources.

Speculation versus Smart Analysis

There is one vital aspect that all traders should deal with when it comes to foreign exchange trading. Traders have to pay attention on the financial and commercial transactions as the trading volume’s main consideration. A smart analysis is important though a speculation can play major role in determining whether a trader can gain higher profit or not.

Foreign exchange speculative market scale will be acquired when there is a liquidity, in which there is a high amount volume of buying and selling at any given time. Liquidity plays major role as it can be the main indicator whether the price will change easily during certain period of time.

Keep yourself updated with the next lesson!

 

 Leave a Reply

(required)

(required)

Time limit is exhausted. Please reload the CAPTCHA.