Recognized as the world’s largest and most liquid financial market, foreign currency exchange (also known as forex or FX) provides continues trade opportunities to traders across the World.
The value of any particular currency is determined by market forces based on trade, investment, tourism and geo-political risk. Traders can take advantage of market movements by trading this over-the-counter (OTC) markets.
Majors are the most liquid and most widely traded currency pairs in the forex market. Major currencies include: EUR/USD, USD/CHF, USD/JPY, USD/CAD and GBP/USD.
Minor currency pairs are pairs where the US dollar is not the counter-currency. These slightly less popular pairs often experience more wild swings in both directions due to less liquidity in the market. Some of the most popular and highly traded cross pairs include: EUR/GBP, EUR/JPY, EUR/CHF and GBP/JPY.
Exotic currency pairs are made up of a major currency paired with the currency of an emerging or a strong but smaller economy from a global perspective such as Hong Kong or Singapore and European countries outside of the Euro Zone.
There are two ways how the forex market can be traded.
Fundamental analysis or technical analysis.
Fundamental analysis involves assessing the economic state of a country, and by extension, the currency. It does not take into account currency price movements. Rather, fundamental forex traders will use data points to determine the strength of a particular currency.
These types of traders will analyze the country’s inflation, trade balance, gross domestic product, growth in jobs numbers and many other benchmarks to find their trading opportunity.
Technical analysis involves pattern recognition on a price chart.
These types of traders will look for price patterns and based on the pattern, these traders will determine the entry and exit points. Unlike fundamental traders, a technical trader is not as concerned about why something is moving because they go by the trends and patterns on the charts.
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Trading financial instruments involves the risk of losing capital. Before you start trading, read the terms and conditions and assess your acceptable risk level.
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