Online currency trading
Online currency trading allows you to make money in the most liquid market in the world. None of the markets can match the foreign exchange market in terms of the trading volume. The daily turnover of the Forex market is $ 5 trillion – almost three times more than the trading volume on the global stock market.
Fundamentals of Currency Trading
When trading currency pairs, you acquire one currency at the expense of another. For example, in the EUR / USD pair, the first is the base currency, the euro, and the second is the quote currency, the US dollar. Accordingly, you buy euros for dollars.
A currency pair is always considered as one whole since trading involves the exchange of one commodity for another. It is impossible to buy Euros for Euros – it doesn't make sense. In our example, the exchange goods are EU and US money. Trades are always made with a currency pair, not one of the currencies.
Suppose the EUR / USD pair is being traded at 1.15345. This means that € 1 costs approximately $ 1.15. The euro is more expensive than the US dollar and to buy one euro we need to pay a dollar and 15 cents.
A few basic concepts of foreign exchange trading
Major currency pairs
Forex traders most often deal with six currency pairs, or the main currency basket: GBP / USD, USD / CHF, USD / JPY, USD / CAD, AUD / USD and EUR / USD. These are the most popular currencies circulating in countries and regions with developed economies. As a result, the exchange rate of the major currency pairs fluctuates during the trading session depending on current political events and current financial reports. AvaTrade guarantees you low spreads for trading the main currency basket. A good reason to start working with us!
Minor currency pairs
Pairs of currencies that are less frequently traded are considered minor. These include everything except the six basic and several exotic pairs. These are less liquid pairs – not many investors are willing to buy them. Minor currency pairs have wider spreads. AvaTrade has a wide variety of minor currency pairs available to you.
Exotic currency pairs
Exotic pairs include emerging market currencies. When trading exotic pairs, you will face the additional difficulties typical of markets with volatile economies. Usually, exotic pairs are illiquid, unpopular with traders, and have wide spreads. Exotic pairs include currencies such as the South African rand (ZAR), the Hong Kong dollar (HKD), the Mexican peso (MXN), and several others.
Currency trading, also known as forex trading, allows investors to capitalize on small increases or decreases in the value of a currency.
Foreign exchange traders buy and sell currency pairs using a forex broker as an intermediary who helps to conduct a transaction between a buyer and a seller. In addition, a reliable broker provides its traders with services that help them make informed trading decisions. FXTM offers real-time analysis tools, expert market commentary, and the best educational resources on the market to support its traders and help them develop their trading strategies.
Key Reasons to Trade Forex
- Market liquidity
- Huge selection of financial instruments
- Low minimum deposits
What is Currency Trading?
Investors always trade currencies in pairs, with the first currency in the pair being called the base currency and the second being the quote currency. Forex traders simultaneously buy one currency in a pair and sell another, depending on what they expect and their predicted changes in the value of currencies in relation to each other.
The value of a currency is influenced by a huge number of fundamental factors that affect the health of a country's economy, such as inflation and interest rates, the level of public debt, and political stability. Typically, forex investors face the greatest volatility before and after key economic or political announcements as traders speculate on their potential impact.
In currency trading, pairs are divided into three categories. Major currency pairs are the most traded pairs in the forex industry and therefore enjoy the most liquidity. Many currencies are paired with the US dollar, such as EUR / USD and USD / JPY. Other pairs popular among traders are EUR / JPY and EUR / GBP.
Minor currency pairs are less popular combinations that major currencies can contain. They are also sometimes called “Cross”. For example, these are EUR / NZD and AUD / CHF pairs.
Exotic currency pairs are not as widely traded as major or minor ones. They consist of a base currency combined with the currency of an emerging economy. Examples of such pairs offered by FXTM to its traders are USD / TRY and EUR / PLN.