Currency Trading

Currency TradingForex trading stands for trading FX currencies in the foreign exchange market. It includes trading currencies from several different countries. Currency Trading is now one of the world’s greatest markets with $2 trillion worth of transactions taking place every day.

This continues to increase as more and more people find out about forex trading and its benefits and start getting involved. Moreover, forex trading does not just contribute to the number of transactions taking place in the world every day but has also proved to be the field with the highest amount of liquid assets available, making it rather unique and new.

Currency Trading Basics

The term ‘foreign exchange’ was chosen due to the fact that this type of trading concentrates on the needs all over the world’s financial markets which are decentralised and can be carried out over the counter at the same time. Moreover, it also includes trading back and forth with currencies of multiple kinds from different countries. Lately, a lot of investors and traders have begun to realise that forex market is definitely something they should be trying out as it gives rise to numerous opportunities.

There exists a long list of demands and requirements that the brokers expect from traders before they register for Forex trading. Traders also need to understand that there are always going to be a few risks involved whenever they trade forex. It is a fact that the forex market has gained a horrible trading transition over the years. Uptrends and downtrends are simply unexpected, making it really important for traders to understand the entire concept and nature of forex trading before they get started. Traders can use a variety of analysis methods in order to figure out the market status to figure out which currency to trade against which in order to make a profit.

What and how does Forex trade take place?

The currency pair is a term you need to thoroughly understand as a forex trader. This term is basically used by brokers and traders to trade in the Forex markets online and is used to describe the exchange rate of a currency over another.

Following are a few pairs that are frequently picked by forex traders in the forex trade market:

Note: In below representation, there are 2 currency pairs available and they are separated by a “/” sign.

  • AUD/USD – Here, the base currency is Australian Dollar, which is being traded against the American dollar. In case a downtrend is noticed, selling the trade will result in a profit and vice versa.
  • GBP/USD – Here, the base currency is Great Britain Pound, which is being traded against the American dollar. In case a downtrend is noticed, selling the trade will result in a profit and vice versa.
  • EUR/USD – Here, the base currency is Euros, which is being traded against the American dollar. In case a downtrend is noticed, selling the trade will result in a profit and vice versa.
  • USD/JPY – Here, the base currency is American dollar, which is being traded against the Japanese yen. In case a downtrend is noticed, selling the trade will result in a profit and vice versa.
  • USD/CAD – Here, the base currency is American dollar, which is being traded against the Canadian dollar. In case a downtrend is noticed, selling the trade will result in a profit and vice versa.
  • USD/CHF – Here, the base currency is American dollar, which is being traded against the Swiss Franc. In case a downtrend is noticed, selling the trade will result in a profit and vice versa.

Suppose a trader purchases Euro, it indirectly means that the trader is selling American dollar if the chosen currency pair is EUR/USD, where the buying and selling take place simultaneously.

For each currency pair, the previous currency becomes the base currency while the latter turns into the counter currency. For instance, assume that the quote of a EUR/USD currency pair is 1.2114. This would mean that in order to get a single EUR, the investors require 1.2114 USD.


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