Forex trading is one of the largest financial markets in the world. It covers every currency traded internationally, as well as the most traded currencies in the individual countries. The forex market is a virtual marketplace where currencies are exchanged. It is over the counter or global market for the international trading of currencies.
This market rates the exchange rates of different currencies based on supply and demand. It includes all facets of trading, buying and selling currencies at determined or current prices. Most traders trade with the US dollar, however, other currencies can also be traded such as the British pound, Canadian dollar, Japanese yen, Swiss franc and the Eurodollar. One of the most traded forex pairs is the U.S. dollar/Japanese yen, which is the most common forex trading pair. In addition, other popular pairs are listed below.
EUR/CHF – The Euro (exchange rate: EUR) and the Swiss franc (exchange rate: CHF) represent the major trading pairs in Europe. Other major currencies that are traded on the forex trading floor include the Australian dollar, Canadian dollar, Chinese renminbi, Swiss franc, and the Norwegian krone. To clarify, the British pound Sterling and the U.S. dollar are the major currencies that are traded on the Forex market. When trading with currencies from different regions, it is important to ascertain if you are dealing with the same currency or two different currencies, depending on which has the higher rate at present time.
USD/JPY – This is another popular currency pair that is traded on the foreign exchange trading floors. The Japanese yen is one of the most highly traded and strongest currencies in the world. It is often used as a trade currency, meaning it trades on the basis of the US dollar. For example, a particular trade on the US dollar might drive the Japanese yen up against the dollar. If you wish to trade the US dollar against the Japanese yen, the major usd value is denoted by USD/JPY.
GBP/CHF – This is another popular currency pair that is traded on the forex trading floors. This is an ideal trading pair for new traders who have a balanced amount of money to invest. The major currencies that are traded on the Forex market include the Euro, the U.K. pound, Canadian dollar, Swiss franc, and the Japanese yen. Unlike the euro and the dollar, there is no physical product that is exchanged when trading with this pair. The trader makes their purchase and sells based on the current value of the spot price in the market.
One major factor that is necessary for an experienced trader to succeed is leverage. Leverage increases your potential return on trades and also allows you to trade on the foreign currency markets without using your full funds. The smaller your investments, the larger your leverage and hence your profit. If you are just starting out, you should always start small and increase your leverage as you grow more familiar with the various strategies and the forex trading platforms.