People who have ever looked at the Forex marketplace have found this article to be of much help. It will answer some key questions mostly asked by newcomers and enthusiasts about the traded stuff in the Forex. We will dig a little deeper into the subject matter and present the whole concept so that people can easily understand it.
What to Trade in Forex?
The most straightforward response to that question is money. The exchange industry doesn’t deal with any physical products; instead, it takes different countries’ currencies to trade. Here is a simple analogy that can help you understand this apparently complex concept of trading with money.
Fancy a country’s money as a share in that country. It is similar to buying shares or stocks in a company. The money’s price typically reflects the trader’s opinion of the country’s economy’s present and imminent condition. So, when one buys the Japanese yen in Forex, it means he has bought a share in the Japanese-economy. He is relying upon his own concept of the about-to-swell Japanese economy.
Like in the stock market, traders need to sell their products or shares to make a profit. They need to sell their purchased currency at a higher price to gain in the Forex market.
At this point, it can be said that the exchange rate for a currency pair reflects the financial state of a country in comparison with other countries.
There are numerous currencies investors can trade with. However, the wisest decisions will be exchanging the major currencies. The word “Major” has been derived from the large traded volume of them. All of them represent some of the world’s most influential economies. However, some professionals have grown different opinions about major currencies. To learn more about the major and minor currencies, click here and learn from the expert traders at Saxo.
The disciplined and uptight traders in the Mena region who strictly follow all the rules only define EUR, USD, GBP, JPY, and CHF as major currencies.
They tag NZD, AUD, and CAD as the “commodity currencies.”
And there are other pirates who never want to play along with the guidelines but still long for keeping things simple consider all the above-stated currencies as the major ones.
The currency symbol in Forex has three letters. The first two letters only indicate the name of the respective country. The third letter is for the name of that country’s money.
This rule has been defined by the currency codes of ISO 4217.
For example, say the NZD. Where NZ is short for New Zealand, and the D defines the dollar. Though some currencies have some other nicknames, the three-lettered symbol is the standard.
Key Influencers of Currency Price
There are thousands of different catalysts that have a great impact on a currency’s price. Mostly all of them happen as internal affairs of a country. A politically critical event, or a change in the financial sector, or a crucial decision made by the government to regulate its currency may affect its price.
All these elements are of two kinds. One is fundamental, and the other one is technical. People use different analyses to track these factors. The currency business platform has introduced various charts and patterns to identify changes that have been brought about by them. As winning and losing depend solely on the price’s behavior, and this behavior depends on these factors, so when learning about trading, one must know about them.
Some common market impacting factors are:
- Significant events and news releases
- Changes in leadership
- Changes in internal political affairs
- Changes in internal financial policies
- Changes in the oil’s price
- The GDP of a country
- Interest Rates
Currency is the only sharable index in Forex trading. The more you know about them, the more perks you will experience while trading them. One cannot just be successful without diving deep into learning all you can about the currencies.