Thursday, June 29, 2017

Currency Trading Pairs

Essentially currency trading is concerned with the trading of currency pairs – at the same time buying one currency, whilst selling another currency from a pair of currencies. World currencies are continually changing as they are traded on the global market with rates influenced by a variety of economic, governmental and social factors, importantly this movement is often related to speculation as much as it is to actual events.

Some currencies are obviously traded more often than others and major traders tend to use four trading pairs – they spend time understanding each of the currencies and the conditions which can affect the price of each currency. Each currency has its own symbol – most of these are logical and are known to many people already for example the US Dollar symbol is USD and Australia is AUD.

One of the most commonly traded currency pairs for example is the Euro (EUR) and the US Dollar (USD). These can be traded either as EUR/USD or USD/EUR depending on which currency you are buying or selling.

This enables you to establish the exchange rate for a buy or sell trade. For example a rate of EUR/USD or 2.1 means you can purchase 1 Euro for 2.1 USD and you could exchange your 1 euro in return for 2.1 USD. Your profit/loss will depend on the price you purchased the currency for when the initial trade was made.

For example if you purchase at the rate of 1.8, you will have made 0.3 USD per Euro held – this means the Euro has increased in value against the USD after you traded.

Most of the trading that takes place centers around a few major currencies there are:

  • USD = US Dollar
  • EUR = European Dollar
  • JPY = Japanese Yen
  • GBP = British Pound
  • CAD = Canadian Dollar
  • AUD = Australian Dollar
  • CHF = Swiss Franc

Most experiences and new traders use a combination of these currencies to form their trades and these ‘major’ currency pairs account for up to 90% of the entire worlds currency trading market place.

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