Currencies are the financial medium of exchange in different countries. Each country has a unique currency, weaker or stronger than that in another country. The most recognized currencies globally are the Dollar, Pound and Euro. The unique thing about currencies is they fluctuate on a daily basis. The occurrence is responsible for the largest financial market in the world; the foreign exchange market, also referred to as forex. The market involves trading currencies as they rise and drop in value. Information on different currencies is important for forex trading.
Currencies Trade in Pairs
In forex, currencies trade in pairs. It means a trader buys one currency say the euro and sells it against the dollar. Currency trade involves some level of speculation. If a dealer buys a euro to trade against the dollar, they believe the euro will go down in value and bring in profits when traded against a dollar rising in value. When a trader goes short, they think the currency value will fall, and if they go long, they believe the currency value will rise. The global forex registers about 28 major trading pairs with eight significant currencies involved.
Major currencies such as the dollar and euro are more stable when it comes to their fluctuation. They do not take major drops, unlike the less recognized currencies. Forex advisors such as Bcapital encourage new traders to trade with the major currencies. It would be highly unwise to begin trading with the Indian rupee against the Iraq dinar. Such currencies have no liquidity and have little information in the public domain.
These are the major currencies trading in the forex exchange.
• USA Dollar
• European euro
• Japanese yen
• British pound
• Swiss Franc
• Canadian dollar
• Australian dollar
• South African Rand
Trading with currencies can be very confusing for first time traders. It is important to trade with a currency that promises security for your money despite the un-transparent nature of the market. Trade brokers control so much of the orders giving rise to conflicts of interest. At Bcapital traders are advised to trade with currencies from larger countries such as the US. Their forex market operates under stiffer regulations as compared to unregulated markets in some of the Balkan countries.
Currency trading involves a lot of risks. Certain economic occurrences in countries can have a sudden impact on currencies. It means one may lose after speculating on a short run or long run. To mitigate some of the risks from the speculation, traders should have as much information as possible on the currency. Interest rates, national debts, and inflation are some aspects in a country that affect the currency. As a forex trader, it is imperative to stay updated on current economic and political issues in countries.
If planning to trade with currencies, learn to manage expectations. Experienced traders expect lows of 2% profits in a month. They do not take uncalculated risks as lucrative as they may seem. Establishing a trading technique and trading rules is a good way to protect a trader from massive losses. Bcapital is keen on advising traders on such techniques to help them wait for the right opportunity.