The foreign exchange market is very liquid:

The foreign exchange market is greater compared to the stock market and the futures market combined. Trillions of dollars worth of transactions are performed daily. The sheer size of the currency market is what makes it extremely liquid. Liquidity simply means that it’s going to be impossible for you not to be able to make deals at any time. Because of the size of the market, there will always be another trader in some other part of the world willing to make a deal. Hence, in currency trading, there is always a chance to make money. One good reason to invest in forex.

Foreign exchange trading is independent of the stock market:

Experts who have studied the currency market stand by their observation that fx trading doesn’t go up and down with the stock market. In other words, the stock market could have a bad day without having affected the forex market.

Of course, the foreign exchange market isn’t exempted from the outcomes of financial economic breakdown. What is great about foreign exchange trading though is that you get to deal with currency pairs. You could adjust trading options when one currency is in a bad position.

Every kind of tool and resource is available:

It’s not possible, not to have enough information regarding the currency market. The internet provides updated strategies, charts and forecasts that will help you analyze the market. In recent years, different types of trading software have also been offered for quicker and much more accurate market analysis.

If you’re feeling a little anxious about trading for the first time you can now also take advantage of practice accounts. A demo account will allow you to perform mock trades similar to real ones but without money involved. You are therefore safe from the risk of financial loss while you’re in the process of assessing your trading level of skill and readiness to trade for real. There is also this type of account where a seasoned trader trades it for you, the so called forex managed accounts. A smart investment vehicle according to traders with experience.

You may make the most of huge leverage opportunities:

A lot of investors are drawn to foreign exchange trading due to leverage opportunities. For a small investment, you can trade for a lot more. The leverage potential of your initial investment depends on your trading firm. Many firms however will allow you to put a few thousand dollars on the table for the chance to trade for millions of dollars. In short, there is a potential to earn a lot for a small amount. So why forex over other investment options?

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What are pairs?

The Forex market trades by buying and selling currencies  from different countries. A pair is the combination of two different currencies that are used to take positions on the Forex market. Usually the first currency is known as the base currency, as this is not moving and the second currency is called counter currency since it will comply with the pair. The base currency is also known as primary and base coin currency as currency trading. The base currency will always be = 1 and the value will vary depending on the pair base coin you choose and the value this has in the international market.

It is important that you know what are the main currencies traded in the Forex market and its acronym in English, since at the time to trade it is usually use the acronym. Later we will tell you what the most used pairs are:

• AUD = Australian Dollar
• CAD = Canadian Dollar
• JPY = Japanese Yen
• EUR = Euro
• GBP = Great British Pond
• USD = U.S. Dollar
• CHF = Swiss Franc
• NZD = New Zealand Dollar

The following is an overview to know about the most traded currencies in the market:

• The U.S. Dollar: USD

Currently, there are other major currencies to the dollar, as the Euro, Japanese Yen, the Pound Sterling and Swiss Franc moving against the U.S. currency. But the dollar is still known as the World’s currency. Most currencies are quoted in dollar terms and some of the currencies of other countries are closely linked to it. This currency became the leading one at the end of WWII, but today by the global economic crisis and recession in the U.S. has ceased to be.

• The Euro: EUR

The euro is the official currency of 16 of 27 member states of the European Union as of 2009.  The states, known collectively as the Euro zone, are Austria, Belgium, Cyprus, Slovakia, Slovenia, Spain, Finland, France, Greece, Holland, Ireland, Italy, Luxembourg, Malta and Portugal. The currency is also used in five other European countries, both official and non-agreed form and thus is in daily use by about 327 million Europeans. After its appearance in December 1999, the Euro replaced the German mark and quickly became the second currency in the world and every day it gain more acceptance around the world. The Euro has a strong international presence around the world, regardless of exposure to various political economic factors that may affect it.

• Japanese Yen: JPY

The yen was fixed to U.S. dollar exchange rate of 362 yen per dollar since April 25, 1949 to 1971. Then it has appreciated significantly. Currently the exchange rate is about 90 yen per dollar, or about 118 yen per euro. This is the third most used currency in the world making the market very liquid 24 hours a day. Since much of the eastern economy moves according to Japan, the yen is quite sensitive to factors such as agricultural production in eastern and technological factors.

• The British Pound: GBP

The pound was originally the weight value of a pound of sterling silver (hence it’s called “sterling”). This was the reference currency to the beginning of World War II, most transactions take place in London today is the largest international market in the world despite its low volume during operation in the  American sessions.

• The Swiss Franc: CHF

The Swiss franc is legal currency  in Switzerland and Liechtenstein. Although its weight in the global economy can’t be compared to the euro or the dollar, the stability of the country they belong to makes it to be taken into account as a “safe haven”, particularly after the assessment as to the European currency from April to September 2000. Its value is around 2/3 of a euro. This is the other major European currency that is not part of the Euro but neither is part of the G-7, but in turn is favored in terms of political uncertainty that may involve the economic community. Therefore it can be said that the Swiss Franc, behaves quite similar to the Euro against the dollar.

How to know what pairs you should trade?

The best opportunities for a successful trade are those where you trade with currency pairs are usually more used on the market and that, therefore, are those that are highly liquid.

For example, you can buy Euros with Dollars, expecting that the Euro will increase its value against the dollar. Once the euro rises against the dollar, you sell the position and make money.

Another more specific example, when trading with the following pair: USD / EUR = 1.5 and you purchase a pair; this means that for every 1.5 Euros that you sell, you get $ 1. However, if you sold the currency pair, you receive 1.5 Euros for every $ 1 you sell.

The four most widely used currency pairs in Forex trading are:

• U $ Dollar / Japanese Yen (USD / JPY)
• Euro / the U.S. Dollar (EUR / USD)
• Pound Sterling / U.S. $ Dollar (GBP / USD)
• U $ Dollar / Swiss franc (USD / CHF).
• The U $ Dollar / Canadian Dollar (USD / CAD)
• The Australian dollar / U.S. $ Dollar (AUD / USD)

28% of global transactions relate to the Euros / dollars pair, 18% against the dollar / yen and 14% with the pair Pound / dollar.

These are pairs that are advised to use due to high liquidity of use within the market. For novice traders, it is recommended that use be limited to only one or two different pairs at the same time for best results. When being a skilled trader you can take risks and experiment with different positions opening up several pairs in the market.

For best results into trending markets, trade the currencies of each session.If it is during first 2-3 hours of the opening and/or closing of each session, this is better.

Finally do not forget, you can become a successful trader if you receive specialized education and constant knowledge.

If you would like to have more information please click here: Forex Trading

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