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Trading currencies is a complicated process demanding good information and perfect understanding of how the Forex market works. ForexExperts.net is a specialized Forex Trading Website offering educational and other resources for world currency traders.
Introduction to Forex Trading
The Foreign Exchange market is the largest financial market in the world with 4 trillion USD daily turnover.
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Forex Trade Tips and other Learning Resources
There are thousands of economic, and other, variables affecting Forex currencies (interest rates, unemployment, inflation, central bank policies, etc.). The most important task for a Forex trader is to focus on what is currently important and to ignore everything else. Currencies move in mid-term circles, and every circle includes several phases.
For example, technical analysis is important in general, but it is important only when there are no fundamental changes in the market. If the level of interest rates changes unexpectedly, technical analysis is incapable of explaining the market behavior. What is the point of analyzing the market using Bollinger Bands, RSI, or Stochastics when an exchange rate surges 1,000 pips without any correction?
Therefore, currency traders must always identify and distinguish the prevailing market forces in order to understand and to forecast the dynamics of the upcoming market action. These markets forces create different market phases and thus different conditions for traders.
These are some examples regarding different market dynamics:
From these three (3) phases, the easier to trade is the 3rd: ‘Dynamic Technical Conditions’ and the hardest is the 2nd: ‘Dynamic Fundamental Conditions’. Fundamental-driven markets require a macroeconomic understanding and the implementation of extremely tight money management.
Minor or Cross-Currency Pairs
Minor Pairs or Forex Crosses are Forex pairs that do not contain the US Dollar. Some of the minor pairs are very popular and very active in the Foreign Exchange market. The most active minors include Euro on one side (EURGBP, EURJPY, and EURCHF).
Description: Euro (EUR) to British pound sterling (GBP)
The cross rate of EUR to GBP is referred as the ‘Chunnel’ because of the Channel Tunnel that connects UK and Europe. Despite EURGBP is not a Forex Major, it is a very liquid Forex pair. Global brokers offer EUR/GBP in very tight spreads and that makes it a very popular choice for day traders and scalpers.
■ (↑) Historical High: 0.9805 (2008)
■ (↓) Historical Low: 0.5678 (2000) – 0.3380 (1953)
EURGBP KEY FACTS
Description: Euro (EUR) to Japanese yen (JPY)
EURJPY or else the ‘Euppy’ or ‘Yuppy’ is a very popular Forex minor based on the vast economic size of the European and the Japanese economies.
■ (↑) Historical High: 402.49 (1975)
■ (↓) Historical Low: 88.87 (2000)
EURJPY KEY FACTS
Analysis of the Seven (7) Forex Majors
What are the Forex Majors?
The Forex Majors are the most liquid currency pairs that contain the US Dollar either on the base side or on the quote side. The majors include seven (7) pairs.
1. EUR/USD (Euro / United States Dollar)
2. USD/JPY (United States Dollar /Japanese Yen)
3. GBP/USD (British Pound / United States Dollar)
4. USD/CAD (The United States Dollar / Canadian Dollar)
5. USD/CHF ( The United States Dollar / Swiss Franc)
6. AUD/USD ( Australian Dollar / United States Dollar)
7. NZD/USD (New Zealand Dollar / United States Dollar)
Description: Euro (EUR) to the United States dollar (USD) or else the ‘Fiber'
EUR/USD or else the ‘Fiber’ is the most traded currency pair in the Forex market, accounting 23% of the total market activity (EURUSD share was 30% in 2001). About 88% of all Forex transactions are denominated in US dollars.
■ (↑) Historical High: 1.6039 (2008) – 1.8700 (1973)
■ (↓) Historical Low: 0.6688 (1985)
EURUSD KEY FACTS
TIPS WHEN TRADING EURUSD
Description: British pound sterling (GBP) to the United States dollar (USD) or else the ‘Cable’
The British Pound (GBP) to the United States dollar (USD) or else the ‘Cable’ is one of the three most heavily traded pairs in the currency market. GBPUSD accounts about 9.2% of the overall Forex market volume (13.4% in 2004). The American economy is the largest in the world while the British economy is the 5th largest (2,650 billion USD).
■ (↑) Historical High: 2.6163 (1972)
■ (↓) Historical Low: 1.0438 (1985)
There are many different practices for predicting the exchange rate movements. Many Forex traders use technical analysis and charting tools to make trading decisions.