Christina Wocintechchat Com Ws6Cjrzdog8 Unsplash Basics Of Currency Trading: Different Currencies And Strategies

Basics of Currency Trading: Different Currencies and Strategies

The currency or the Forex market is known as the largest and also the most liquid market globally. You can find here some of the strongest currencies being exchanged to one another such as the U.S dollar, Euro, and British Pound. The Forex market is open 24 hours a day and the value of these currencies fluctuates against each other as this is how traders get to have potential profits.

The Forex Market

Currencies are the money being used by a specific country. Some of the most well-known currencies in the world are the U.S. dollar, Japanese yen, Euro, Swiss franc, and British pound. These currencies are being represented by currency symbols like $, £, ¥, or €. But in the Forex market, they are using a specific code recognized by the International Organization for Standardization (ISO) to specifically identify a currency when they are used in currency trading.

Major Developed Currencies

  • USD – U.S. Dollar
  • JPY – Japanese Yen
  • CAD – Canadian Dollar
  • NZD – New Zealand Dollar
  • EUR – Euro
  • AUD – Australian Dollar
  • GBP – British Pound
  • SEK – Swedish Krona
  • CHF – Swiss Franc
  • NOK – Norwegian Krone

Select Emerging Currencies

  • KRW – South Korean Won
  • BRL – Brazilian Real
  • PLN – Polish Zloty
  • CNY – Chinese Renminbi (Yuan)
  • MYR – Malaysia Ringgit*
  • SGD – Singapore Dollar
  • IDR – Indonesian Rupiah
  • PHP – Philippine Peso
  • INR – Indian Rupee
  • MXN – Mexican New Peso

What are the factors that determine the exchange rates of currencies?

An exchange rate is known as the relative value of the currency against another currency. When you trade currency, you will mostly see these indications – GBP/USD, USD/CHF, USD/JPY, and EUR/USD. Most of the time, you will see USD or U.S. dollar as the reference currency and this means that countries are quoting the U.S dollar.

What made currency trading very active nowadays?

Trading currencies isn’t always acted as it has been nowadays. Before currencies are not always very flexible or they were considered ‘free floating’ just like a majority of currencies that we have nowadays. Before, fixed exchange rates were being used under the Bretton Woods agreement effective throughout the 40 countries. But the Bretton Woods became inactive after the United States gave up using the said gold standard. But Fixed exchange rates are still being widely used nowadays. One of the best examples of this is the Chinese yuan which is usually being paired with the U.S. dollar.

The Market Players in the Currency Market

There is a swift authority when it comes to market players in the currency market throughout the years. Previously, the most significant market players were the countries that are known to be exporters and importers. International trade is mostly the driver with regard to the supply and demand of a currency. Although trade is still being influenced by commerce, nowadays, the importance of these trades in the market has slowed down because financial investors are starting to become more active in the Forex market.

What drives this transition that was once dominated by commerce was the eagerness of the investors to find more profitable opportunities to invest across the other border. Over the years, investors are starting to classify asset classes as an additional source of income. It has made currency trading quite active nowadays and manipulated not just by huge banks and hedge funds but also by retail traders. 

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Rajesh Singh

Rajesh Singh is an SEO expert, writer and blogger with a strong passion for writing. He shares views and opinions on a range of topics such as Business, Health/Fitness, Lifestyle, Parenting and lot more.

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