Currency trading – Currency Pairs Explained
December 16th, 2009
The Currency Markets are the nearly all exhilarating areas of investment on the internet at the moment. Those looking for alternative avenues of investment other than mutual funds or stock trading have found currency trading to be a rewarding endeavor. This piece is an in-depth look at the traded currencies that are the reason currency markets exist in the first place.
Currencies are traded in pairs rather than alone in the currency market. When you buy or sell a currency pair, you are essentially buying a currency and selling another. Regularly traded currency pairs are given nicknames by traders. Some of the more popular nicknames include Cable (GBP/USD) and the Loonie (Usd/Cad). Currency pairs that see the a large amount trading are practically always one of the major pairs such as Eur/Usd, Australian and New Zealand crosses as well as the Yen crosses. Outside the majors, we have what are recognized 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 hallmark of exotic pairs.
The buying of Aud/Nzd in actuality means the buying of the Aussie dollar and the selling of the New Zealand dollar. Assuming you bought a currency pair, the appreciation of the first currency in the pair means a profit for you. Profits from a short trade are consequent from the appreciation of the quote currency against the base currency. Profits and losses are gained this way in the currency exchange market.
There is a pair for just about any two currencies conceivable, but most brokers stay with the bread and butter currency pairs. Forex brokers that do offer exotics normally charge very high spreads per trade. Different forex brokers have numerous spreads on their currency pairs. 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. Ultimately, a forex broker with low spreads and a good reputation will be able to attract more traders.
In all probability 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 dependable with reasonably low spreads. Between them, Oanda is probably the only one that offers the widest mixture of currency pairs. But they are all exceptional forex brokers should you be seeking for an online currency broker.
Click here for currency exchange information and here for a look at global currencies. Rueben Gomez has been in the forex trading markets for more than 7 years. His goal is to share his knowledge on the topic whever he can.