The Seven Most Traded Currencies in Forex

The Seven Most Traded Currencies in Forex


The best way to keep up with the latest on FOREX is to constantly stay on the lookout for new information. Current info is not always the easiest thing to locate. Fortunately, this article includes the latest available.

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Currencies are traded in dollar amounts called lots. One
lot is equal to $1,000, which controls $100,000 in currency.
This is what is known as the "margin". You can control $100,000
worth of currency for only 1,000 dollars. This is what is called High Leverage.

Currencies are always traded in pairs in the FOREX. The
pairs have a unique notation that expresses what currencies
are being traded. The symbol for a currency pair will always
be in the form ABC/DEF. ABC/DEF is not a real currency pair,
it is an example of a symbol for a currency pair. In this
example ABC is the symbol for one countries currency and DEF
is the symbol for another countries currency.

Here are some of the common symbols used in the Forex:

USD - The US Dollar
EUR - The currency of the European Union "EURO"
GBP - The British Pound
JPN - The Japanese Yen
CHF - The Swiss Franc
AUD - The Australian Dollar
CAD - The Canadian Dollar

There are symbols for other currencies as well, but these
are the most commonly traded ones.

A currency can never be traded by itself. So you can not
ever trade a EUR by itself. You always need to compare one
currency with another currency to make a trade possible.

Some of the common PAIRS are:

EUR/USD Euro / US Dollar
"Euro"

USD/JPY US Dollar / Japanese Yen
"Dollar Yen"

GBP/USD British Pound / US Dollar
"Cable"

USD/CAD US Dollar / Canadian Dollar
"Dollar Canada"

AUD/USD Australian Dollar/US Dollar
"Aussie Dollar"

USD/CHF US Dollar / Swiss Franc
"Swissy"

EUR/JPY Euro / Japanese Yen
"Euro Yen"

The listed currency pairs above look like a fraction. The
numerator (top of the fraction or "left" of the / however
you want to SEE it) is called the base currency. The
denominator (bottom of the fraction or "right" of the
/however you want to SEE it) is called the counter currency.
When you place an order to buy the EUR/USD, for instance,
you are actually buying the EUR and selling the USD. If you
were to sell the pair, you would be selling the EUR and
buying the USD. So if you buy or sell a currency PAIR, you
are buying/selling the base currency. You are always doing
the opposite of what you did with to base currency with the
counter currency.

If this seems confusing then you're in luck. You can always
get by with just thinking of the entire pair as one item.
Then you are just buying or selling that one item. Thinking
like this will still enable you to place trades. You only
need to be aware of the base/counter concept for Fundamental
Analysis issues.

So why is it important to know about the base/counter
currency? The base/counter currency concept illustrates
what is actually taking place in a Forex transaction. Some
of you reading this, know that short-selling was restricted
in the stock market *(Short-selling is where you sell a
stock/currency/option/commodity first and then try to buy it
back at a lower price later). But in the FOREX you are
always buying one currency (base) and selling another
(counter). If you sell the pair you are simply flipping
which one you buy and which one you sell. The transaction is
essentially the same. This allows you to short-sell with no
restrictions.

You want to be able to short-sell with no restrictions so
you can make money when the market drops as well as when it
rises. The problem with traditional stock market trading is
that the market has to go up for you to make money. With
FOREX trading you can make money in all directions.

http://www.1-forex.com


About the Author


FOREX Trader and Freelance writer.

http://www.1-forex.com

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Hopefully the sections above have contributed to your understanding of FOREX. Now might be a good time to write down the main points. The act of putting it down on paper will help you remember what's important.

Of course, it's impossible to put everything into just one article. Even if you don't know everything about FOREX, you've done something worthwhile: you've expanded your knowledge.

Forex Trading Making Money with Money

Forex Trading Making Money with Money


The best way to keep up with the latest on FOREX is to constantly stay on the lookout for new information. Current info is not always the easiest thing to locate. Fortunately, this article includes the latest available.

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Forex trading is one of the growing markets for making money in today's world economy. If you are part of the forex trading game, you need well thought out and planned strategies. You also need up to the minute information and reliable data to help you along the way. With this said, in order to be successful at forex, you'll want to invest in high quality products to help you analyze, watch and track the forex market. No little project at all. The good news to you is that there are options out there to help you do just that.
First of all, realize that forex trading is an excellent market to trade in. It has the ability to make you money without a whole lot of investing. And, you can trade with whatever you have, not necessarily millions of dollars. To get into the forex market, it makes sense to pay attention to the numbers for some time. Then, you'll have a good feel for it long before your dollars are involved.

But, once you do get in, you'll need up to the minute information. Consider the purchase of and use of valuable forex trading software programs. These programs can help you to track what is happening and in some, it will help you to better analyze the information as well. Of course, this in turn will help you to make the right decisions about your investments.

While market trading is always risky, many find that forex trading, when done right, is one of the most profitable without much start up investment opportunities out there. With the ability that you have to monitor and respond virtually instantly to the world's market in forex, you are better able to make the right decisions which will then lead to those gains you are seeking.


About the Author

for more information please see http://www.forex-trading-help.co.uk


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Hopefully the sections above have contributed to your understanding of FOREX. Now might be a good time to write down the main points. The act of putting it down on paper will help you remember what's important.

Of course, it's impossible to put everything into just one article. Even if you don't know everything about FOREX, you've done something worthwhile: you've expanded your knowledge.

FOREX Trading Risks

FOREX Trading: Know The Risks


You may see claims on some FOREX web sites implying that FOREX is a risk-free pastime. If so, this article aims to disenchant you.

In FOREX you are trading substantial sums of money, and there is always a possibility that a trade will go against you. There are several trading tools, though, that can minimize your risk. With caution, and above all education, the FOREX trader can learn how to trade profitably and minimize loss.




The Scams

FOREX scams were fairly common a few years ago. The industry has cleaned up considerably since then, but you still need to exercise caution when signing up with a FOREX broker. Do some background checking. Reputable FOREX brokers will be associated with large financial institutions like banks or insurance companies, and they will be registered with the proper government agencies. In the United States brokers should be registered with the Commodities Futures Trading Commission (CFTC) or a member of the National Futures Association (NFA). You can also check with your local Consumer Protection Bureau and the Better Business Bureau.





The Risks

Assuming you are dealing with a reputable broker, there are still risks to FOREX trading. Transactions are subject to unexpected rate changes, volatile markets and political events.

Exchange Rate Risk refers to the fluctuations in currency prices over a trading period. Prices can fall rapidly resulting in substantial losses unless stop loss orders are used (see below).

Interest Rate Risk can result from discrepancies between the interest rates in the 2 countries represented by the currency pair in a FOREX quote. This discrepancy can result in variations from the expected profit or loss of a particular FOREX transaction.

Credit Risk is the possibility that 1 party in a FOREX transaction may not honor their debt when the deal is closed. This may happen when a bank or financial institution declares insolvency. Credit risk can be minimized by dealing on regulated exchanges, which require members to be monitored for credit worthiness.

Country Risk is associated with governments that may become involved in foreign exchange markets by limiting the flow of currency. There is more country risk associated with "exotic" currencies than with major countries that allow the free trading of their currency.


Limiting Your Risk

FOREX trading can be risky, but there are ways to limit risk and financial exposure. Every FOREX trader should have a trading strategy; i.e., knowing when to enter and exit the market, and what kind of movements to expect. Developing strategies requires education, which is the key to limiting FOREX risk. At all times follow the basic rule: Never use money that you cannot afford to lose.

Every FOREX trader needs to know at least the basics about technical analysis and how to read financial charts. He should study chart movements and indicators and understand how charts are interpreted. There is a vast amount of information on FOREX trading available both on the Internet and in print. If you want to be successful at FOREX, then educate yourself so you know what you are doing.

Stop-Loss Orders

Even the most knowledgeable traders, however, can't predict with absolute certainty how the market will behave. For this reason, every FOREX transaction should take advantage of available tools designed to minimize loss.

Stop-loss orders are the most common ways of minimizing risk when placing an entry order. A stop-loss order contains instructions to exit your position if the currency price reaches a certain point. If you take a long position (expecting the price to rise) you would place a stop loss order below current market price. If you take a short position (expecting the price to fall) you would place a stop loss order above current market price.

Stop loss orders can be used in conjunction with limit orders to automate FOREX trading. Limit orders specify that an open position should be closed at a specified profit target.

Placing An Order

As an example, if you take a short position on USD/CDN it means you expect the US dollar to fall against the Canadian dollar. The quote is USD/CDN 1.2138/43 -- you can sell US$1 for 1.2138 CDN dollars or sell 1.2143 CDN dollars for US$1.

You place an order like this: Sell USD: 1 standard lot USD/CDN @ 1.2138 = $121,380 CDN Pip Value: 1 pip = $10 Stop-Loss: 1.2148 Margin: $1,000 (1%)

You are selling US$100,000 and buying CDN$121,380. Your stop loss order will be executed if the dollar goes above 1.2148, in which case you will lose $100.

However, USD/CDN falls to 1.2118/23. You can now sell $1 US for 1.2118 CDN or sell 1.2123 CDN for $1 US.

Because you entered the transaction by selling US dollars (buying short), you must now buy back US dollars and sell CDN dollars to realize your profit.

You buy back US$100,000 at the current USD/CDN rate of 1.2123 for a cost of 121,223 CDN. Since you originally sold them for CDN$121,380 you made a profit of $157 Canadian dollars or US$129.51 (157 divided by the current exchange rate of 1.2123).

FOREX Trading Philosophy

Your FOREX Trading Philosophy


"Easy money" is the allure that captivates many beginning FOREX traders. FOREX websites offer "risk-free" trading, "high returns", "low investment." These claims have a grain of truth in them, but the reality of FOREX is a bit more complex.




Mistakes Of The Beginning Trader

There are 2 common mistakes that many beginner traders make: trading without a strategy and letting emotions rule their decisions. After opening a FOREX account it may be tempting to dive right in and start trading. Watching the movements of EUR/USD for example, you may feel that you are letting an opportunity pass you by if you don't enter the market immediately. You buy and watch the market move against you. You panic and sell, only to see the market recover.

This kind of undisciplined approach to FOREX is guaranteed to lose you money. FOREX traders must have a rational trading strategy and not make trading decisions in the heat of the moment.







Understanding Market Movements

To make rational trading decisions, the FOREX trader must be well educated in market movements. He must be able to apply technical studies to charts and plot out entry and exit points. He must take advantage of the various types of orders to minimize his risk and maximize his profit.

The first step in becoming a successful FOREX trader is to understand the market and the forces behind it. Who trades FOREX and why? Who is successful and why are they successful? This will allow you to identify successful trading strategies and use them yourself.


Accountability: Advantage Or Disadvantage?

There are 5 major groups of investors who participate in FOREX: governments, banks, corporations, investment funds, and traders. Each group has its own objectives, but 1 thing all groups except traders have in common is external control. Every organization has rules and guidelines for trading currencies and can be held accountable for their trading decisions. Individual traders, on the other hand, are accountable only to themselves.

The trader who lacks rules and guidelines is playing a losing game. Large organizations and educated traders approach the FOREX with strategies, and if you hope to succeed as a FOREX trader you must follow suit.


Strategies For Money Management

Money management is an integral part of any trading strategy. Besides knowing which currencies to trade and how to recognize entry and exit signals, the successful trader has to manage his resources and integrate money management into his trading plan. Position size, margin, recent profits and losses, and contingency plans all need to be considered before entering the market.

There are various strategies for money management. Many rely on the calculation of core equity -- your starting balance minus the money used in open positions.


Core Equity And Limited Risk

When entering a position try to limit your risk to 1% to 3% of each trade. This means that if you are trading a standard FOREX lot of $100,000 you should limit your risk to $1,000 to $3,000. You do this with a stop loss order 100 pips (1 pip = $10) above or below your entry position.

As your core equity rises or falls you adjust the dollar amount of your risk. With a starting balance of $10,000 and 1 open position, your core equity is $9000. If you wish to add a second open position, your core equity would fall to $8000 and you should limit your risk to $900. Risk in a third position should be limited to $800.


Greater Profit, Greater Risk

You should also raise your risk level as your core equity rises. After $5,000 profit, your core equity is now $15,000. You could raise your risk to $1,500 per transaction. Alternatively, you could risk more from the profit than from the original starting balance. Some traders may risk up to 5% against their realized profits ($5,000 on a $100,000 lot) for greater profit potential.

These are the kinds of strategic moves that allow a beginner to get a foothold on profitable trading in FOREX.

FOREX: What Is It And How Does It Work

FOREX: What Is It And How Does It Work

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The Foreign Exchange market, also referred to as the "Forex" is the biggest and largest financial market in the world. It has a daily average turnover of US$1.9 trillion- just imagine that amount of money! Don't you want to join this trillion-dollar industry?
Forex is the simultaneous buying of one currency and selling of another. Currencies are traded in pairs, for example Euro/US Dollar (EUR/USD) or US Dollar/Japanese Yen (USD/JPY). So basically, Forex is trading.
There are two reasons to buy and sell currencies. About 5% of daily turnover is from companies and governments that buy or sell products and services in a foreign country or must convert profits made in foreign currencies into their domestic currency.
The other 95% is trading for profit, or what you call speculation. Investors frequently trade on information they believe to be superior and relevant, when in fact it is not and is fully discounted by the market.
On one side of each speculative stock trade is a participant who believes he has superior information and on the other side is another participant who believes his information is superior.
For speculators, the best trading opportunities are with the most commonly traded (and therefore most liquid- meaning its in cash or convertible to cash) currencies, called "the Majors." Today, more than 85% of all daily transactions involve trading of the Majors.
A true 24-hour market, Forex trading begins each day in Sydney, and moves around the globe as the business day begins in each financial center, first to Tokyo, London, and New York. Unlike any other financial market, investors can respond to currency fluctuations caused by economic, social and political events at the time they occur — real time- day or night.
The Forex market is considered an Over The Counter (OTC) or 'interbank' market. This is because the transactions are conducted between two counterparts over the telephone or via an electronic network. Trading is not centralized on an exchange compared to stocks and futures markets.
Understanding Forex quotes
Reading a Forex quote may seem a bit confusing at first. However, it's really quite simple if you remember two things: 1) The first currency listed first is the base currency and 2) the value of the base currency is always 1.
The US dollar is the centerpiece of the Forex market and is normally considered the 'base' currency for quotes. In the "Majors", this includes USD/JPY, USD/CHF and USD/CAD. For these currencies and many others, quotes are expressed as a unit of $1 USD per the second currency quoted in the pair. For example, a quote of USD/JPY 110.01 means that one U.S. dollar is equal to 110.01 Japanese yen.
When the U.S. dollar is the base unit and a currency quote goes up, it means the dollar has appreciated in value and the other currency has weakened. If the USD/JPY quote we previously mentioned increases to 113.01, the dollar is stronger because it will now buy more yen than before.
The three exceptions to this rule are the British pound (GBP), the Australian dollar (AUD) and the Euro (EUR). In these cases, you might see a quote such as GBP/USD 1.7366, meaning that one British pound equals 1.7366 U.S. dollars.
In these three currency pairs, where the U.S. dollar is not the base rate, a rising quote means a weakening dollar, as it now takes more U.S. dollars to equal one pound, euro or Australian dollar.
In other words, if a currency quote goes higher, that increases the value of the base currency. A lower quote means the base currency is weakening.
Currency pairs that do not involve the U.S. dollar are called cross currencies, but the premise is the same. For example, a quote of EUR/JPY 127.95 signifies that one Euro is equal to 127.95 Japanese yen.
When trading Forex you will often see a two-sided quote, consisting of a 'bid' and 'offer'. The 'bid' is the price at which you can sell the base currency (at the same time buying the counter currency). The 'ask' is the price at which you can buy the base currency (at the same time selling the counter currency).
by Frederic Madore