Currency Pairs – Their Role In The Currency Exchange Markets
The fastest growing kind of online investment nowadays is undoubtedly the currency trading market. Individuals looking beyond the realm of traditional investments such as the bonds market have been flocking to the currency markets. This article is an in-depth look at the traded currencies that are the reason currency markets exist in the first place.
All currencies on the currency exchange markets come in the variety of a pair. When a long or short position is taken on a currency pair, the purchase of one currency takes place against the sale of another. The a good number common currency pairs are often given nicknames by currency traders. Some of the more popular nicknames consist of Cable (GBP/USD) and the Loonie (Usd/Cad). Major currency pairs are regularly crosses made up of the Euro, Pound, Usd, CHF and the Yen. Outside the majors, we have what are known as exotic currency pairs such as Usd/Huf, MXN/Jpy and so on and so forth. Spreads ranging from high to extremely high are the trademark of exotic pairs.
When you buy the Eur/Usd currency pair, you are in fact buying the Euro and selling the American dollar. Profits are consequent from the appreciation of the base currency (First currency in the pair) against the quote currency (2nd currency in the pair), assuming you took a long trade. Profits from a short trade are consequent from the appreciation of the quote currency against the base currency. This is how money is made in the currency markets.
There is a pair for just about any two currencies possible, but a good number brokers stay with the bread and butter currency pairs. Unless you’re ready to pay upwards of 30 or so pips per trade, its best to just stick to normally traded currency pairs. The spread differs according the forex broker in question. Commonly traded pairs such as the eur/usd normally have lower spreads by the top forex brokers due to the competitive nature of the industry. Lower spreads mean more clients for their company in the end.
Perhaps the best three brokers on the internet now are none other than Fxcm, InterbankFX and Oanda. All these broker have been in the business for years and are reliable with moderately low spreads. The widest choice of currency pairs among these brokers can be found at Oanda. Having said that, they are all worthwhile forex brokers to do business with.
Read more about currency trading By clicking here as well as the currency pairs over here. Rueben Gomez has been in the forex trading markets for more than 7 years. He operates a finance forum for the discussion and sharing of finance related topics.
