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Say for instance you are walking into a grocery shop to buy a some chocolate you give the shop owner currency in exchange to get the chocolates.
Currency pair is just like that instance you are going to place where so many currencies available you are giving a value to obtain another currency. In this scenario the first currency what you offer becomes base currency and the second currency is the quote currency. For example pair EUR/USD, the euro is base currency and the US dollar becomes the quote currency.
Some currencies become more influential than the other due to the nature of its stability. These are known as major currencies or major pair in forex term. Dominating currencies in the foreign exchange trades are United States Dollar (USD), the EURO (EUR), the Japanese Yen (JPY), the British Pounds (GBP), and Swiss Franc (CHF). These major currencies are dominating the forex trading widely since long.
The strong political systems and strong economics. These stable situation make them so attractive and investors trust them as right place to trade. The United States has a robust economy make them largest financial market in the world. That makes their currency a highly influential.
Liquidity of the currency is the next factor that contribute to make them influential. What is exactly is liquidity in a currency. Let us findout. When a currency becomes by rate so fluctuate, that says unpredictably goes down and up by its value no one will think of dealing in those currency. When you go to bed it will be 200 and when you wake up in the morning it becomes 300, you will feel it’s a nightmare. The major currencies have high liquidity as they are actively traded by financial institutions, central banks, and large corporation across the world. It says high liquidity the most ease that currency can be bought or sold without causing significant price fluctuation.
It is always interesting to get to know about these major currencies as its liquidity is high compare to other minor currencies. The facts that always decide how the a currency become so stable decided upon global economic events and market trends. You must closely monitor these influential currencies to make trade decisions.
Minor or exotic currencies, are some other currencies extensively trade in the forex market. Australian Dollar(AUD) the Canadian Dollar(CAD), the New Zealand Dollar(NZD) and South African Rand(ZAR) are some of them.
Why people deal in AUD and CAD?
One significant reason why the Australian Dollar traded because, Australia is a major exporter of commodities such as iron ore and coal. Its currency often move along with commodity price. Similarly, Canada export oil, which makes the Canadian Dollar (CAD) highly have a mutual relationship with crude oil price.
For beginners always can learn more about currency pair in forex trading. Below are some links that provide comprehensive guides and tutorials
It is crucial to be updated always about currency pair. Beginners can always follow reputable financial news websites such as Bloomberg, Reuters, and Financial Times, which provide real time updates on market trends. Your decision to make an investment based on the facts is very crucial.
The United Kingdom has a bigger currency exchange market than the United States: Only 19% of all foreign exchanges occur in the US. The UK is the center of forex trading, with 41% of all the world’s currency exchanges taking place in the country
Forex Trading was Available to Only Banks and Big Institutions: Forex trading was available only to banks and big institutions until the late 1990s. The internet revolutionized the forex market, making it accessible to retail traders. Today, anyone with a computer and an internet connection can trade forex
The Forex Market’s Daily Turnover is 5.3 Trillion Dollars: An average of 5.3 trillion US dollars gets traded on the foreign exchange market each day. It’s about 53 times higher than the New York Stock Exchange and equivalent to four times the world’s GDP. It is so big that it can buy a car for each American household
“Currency trading is not just about numbers and charts; it’s a fascinating world where global economies connect.”
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HIGH RISK WARNING: Foreign exchange trading carries a high level of risk that may not be suitable for all investors. Leverage creates additional risk and loss exposure. Before you decide to trade foreign exchange, carefully consider your investment objectives, experience level, and risk tolerance. You could lose some or all of your initial investment. Do not invest money that you cannot afford to lose. Educate yourself on the risks associated with foreign exchange trading, and seek advice from an independent financial or tax advisor if you have any questions. Any data and information is provided ‘as is’ solely for informational purposes, and is not intended for trading purposes or advice. Past performance is not indicative of future results.
