Currency trading

What is currency trading

Currency trading online

Currency trading is the most liquid and robust market in the world. In fact, no other market can compare to the sheer value of this massively traded market. Estimates peg the value of Forex trading at around $5 trillion per day, a figure that far outstrips the value of all stock market trading in the world.

The Basics of Currency Trading

When you trade currency pairs, you effectively buy one currency and sell the other. Let’s take a simple example to illustrate how this works: the EURUSD is a commonly traded currency pair. The EUR is the symbol for the Euro and the USD is the symbol for the US Dollar. In the above currency pair, the EUR is referred to as the base currency and the USD is referred to as the quote or counter currency.

The ratio is actually viewed as a single unit, even though it refers to 2 individual currencies. In other words, you trade the EURUSD currency pair – not the EUR or the USD.

Let us further clarify this basic currency trading example by adding in a few figures. If we assume that the EURUSD is trading at 1.25345, this means that every €1 = $1.25. In other words, the Euro is stronger than the Dollar, or on the other hand, you would need more Dollars to buy Euros.

A Few Basic Terms in Currency Trading

Major Currency Pair

When you trade currency pairs, you will encounter six major currency pairs in your daily trades. These include the GBPUSD, USDCHF, USDJPY, USDCAD, AUDUSD and EURUSD. Major currency pairs include one major currency against the US dollar. Simply put, these are the most actively traded currency pairs in the world, and they are more likely to exhibit greater volatility. When you trade major currency pairs at Friedberg Direct you are guaranteed competitive spreads (the difference between the buy and sell rate of a currency pair) – another great reason to trade with us.

Minor Currency Pair

Minor Pairs, by contrast, are those currency pairs that are less traded than the major currency pairs. They are less liquid than the major currency pairs and they often have wider spreads. As a general rule, minor currency pairs are any pairs other than the six major currency pairs listed above, but which include the 6 major currencies – not against the USD. Here at Friedberg Direct, we have a wide selection of minor currency pairs for you to trade.

Exotic Currency Pair

Exotic currency pairs typically include a currency from an emerging-market country. The reason that they are called exotic currency pairs has nothing to do with the location of the country, but rather the additional challenges involved in trading these currency pairs. Exotic currency pairs are generally illiquid, with wider spreads and fewer market-makers. Examples of exotic currency pairs include the Hong Kong Dollar (HKD) and the Mexican Peso (MXN).

Now that you understand online currency trading, download the MT4 platform, and open an account at Friedberg Direct to begin trading your favourite major, minor and exotic currency pairs today.