Things to Know about the Currency Pairs in the Forex

Things to Know about the Currency Pairs in the Forex

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In the beginning, newbies can be confused and overwhelmed by the huge number of currency pairs available in the terminal, such as MetaTrader4. We may ask ourselves which one is the best pairs for trading. The answers can be different and may vary according to the usages of the terminal windows. Beginners need so much time to analyze the various pairs of currencies, which can help to find out the best pairs using our trade account.

Currency pair

In the FX market, a trade occurs using two currencies where someone buys one currency, which is called the buyer/bid, and another currency is sold, which can be referred to as the seller/ask. To specify the currency pairs’ setup an international code is used. For instance, EUR/USD of 1.25 can indicate that one Euro is worth $1.25. In this case, the Euro (EUR) is working as the base currency, and the US dollar is working as a counter currency.

Mostly used currencies

There are so many commonly used pairs in FX trading, but among them, the US dollar is in the strongest and most dominant position. If we search for the primary reason, we will find that the economy of the US is the main reason in this case as it has the largest economy in the world. The global FX market also has currency pairs thathave high liquidity.

The US dollar is part of foreign transactions in most countries. But for every investor, it may not be the bestfor trading. They use multiple factors to decide which will be best for them. EUR/USD, USD/JPY, GBP/USD, USD/CHF, USD/CAD, AUD/ESD, and EUR/JPY are some of the popular factors which we can consider.

The prices of the major currencies get continuously change, and because of this, the values of pairs also change frequently. This accelerates the change of the trade volumes of the two countries. The countries with financial power play vital roles here. In the day time, that become so volatile, and the spread becomes so lower. Remember, selecting a tight broker is critical when you are trading the futures market. To learn more, visit https://www.home.saxo/en-sg/products/futures. By enhancing your knowledge, you will be able to make more precise decisions.

EUR/USD currency pair

This is regarded as the most popular currency pair because of its lowest spread with the FX brokers. Among all the trades, 1/3rd is done using US currency pair. The FX pair is not as volatile in US dollars, and for this reason, 1/3rd of the trades are conducted using USD. As Forex pairs are not so volatile, we can consider this market for the currency pair trade.

Bid-Ask Spread

Spread plays a vital role in executing the trades with the brokers. The difference between the asking price and bid price is regarded as the spread. The bid price is considered as the rate at which we can sell a certain pair. On the other hand, the asking price is considered the buying price of the currencies.

Whenever we trade on currencies, we will find two prices are shown there, which will also picture the spread of the two currencies. The price which is lower is mentioned as “Bid,” and this is offered by the broker and willing to buy for the base currency in exchange for the counter currency. If someone wants to open small lot size trades, he can execute them at the lowest pricing. Generally, brokers become willing to sell at the base currency, such as USD against the EUR as the counter currency.

Newbies should conduct deep research regarding currencies and their valuation in the Forex market. Without the understanding of the continuous economic changes and their effect on the pairs, it will be very daunting for a beginner to execute the trades on the Forex platform. Experts believe that financial knowledge is a prerequisite of FX trading.

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