Taking trips in a foreign country changing your domestic currency to the currency of the foreign country is important. Foreign Exchange abbreviation is Forex, this is known as the largest financial market. Upon research the Forex market trades up to 5 trillion per day. Putting around into a perspective, the GDP of the US is around 18$ trillion meaning that Forex market trades entire USA economy in just 3 to 4 days! As the largest in the World’s currencies, the common traders that exchange currencies everyday are the governments, large company, banks, hedge funds, retail traders and investors.
Ever wonder what currencies are mostly being traded in Forex? The currencies are grouped in to 2 categories. The exotic currencies and the major currencies. The exotic currencies are those who aren’t actively exchange in the market. The exotic currencies consist of the following: Argentina peso, Mexican peso, Turkish lira, Russian ruble, South African Rand, Czech krone and so on. The exotic currency has less seller and buyer. Beginners must not invest into these currencies this is not ideal to begin with.
The Major currencies are the active ones in the trade market. Having a huge number of buyers/sellers trading all over the world with these currencies. For a beginner this is a good start for you, chances are you are in the risk of loss. There are 8 major currencies, the following are the US Dollar, GBP British pound, EUR euro, CAD Canadian dollar, JPY Japan yen, AUD Australian Dollar, CHF Swiss franc, NZD New Zealand dollar. The chart above shows the complete list.
Every currency has different personalities and value in comes in trading. They are all quoted in pairs. Trading only two currency pairs simultaneously. Means that the first currency is bought and the other one in the pair is sold for a long position and the short position is the vice versa. Look at the sample image below:
This is also a major pair, remember that any pair that includes the US dollar and other remaining major currencies are called the major pair. It is important for a beginner to start learning about this, and in which currency you will be investing with.
If by chance that the EUR/USD pair exchanges at 1.2000, this implies it takes 1.2000 US dollars to purchase 1 euro. You’ll likewise see that there are two trade rates at which a pair trades– those are known as the bid cost and the asking cost, and the genuine cost you’re paying relies upon whether your position is long or short. The bid and ask costs are normally extremely near one another, particularly with the major currency pair, and the distinction between them speaks to your exchange cost or “spread”