Today currency trading market can be considered as a multi-billion dollar market where world currencies are exchanged back and forth on a day to day basis. In fact, as per the currency trading basics, this type of trading is usually done through brokers and market makers. The practice of currency trading is even referred to as Foreign exchange or Fx trading. Today, it is one of the largest online trading markets in the world that can offer very real benefit over equity trading like the stock exchange. The volatile nature of currency market is extremely high, which in turn can help you generate enormous return on a given exchange.
These days, lot of currencies is used in the world but not all of them can be traded actively in the foreign exchange market. Although the forex market is often termed as a banker’s game, currencies can sometimes be great diversification for a portfolio that might have hit a bit of a pothole. As a result, if you are engaged in currency trading in forex market, it is important to choose among those currencies that can be frequently traded. You must remember that it’s a market that can offer wonderful opportunity when other global forums enter the doldrums. So, if you are looking to make a mark in currency trading, let us take a look at various important currencies you should know as a trader or investor:
U.S. Dollar (USD) -The U.S. dollar (USD) is one of the major currencies that dominate the world market. Being the currency of world’s largest economy, the United States, it is supported by economic fundamentals, including gross domestic product and employment reports. The U.S. dollar is extensively influenced by the central bank and any declaration about interest rate policy. It can be considered as a benchmark that trades against other major currencies, especially the Euro, Yen and British Pound.
European Euro (EURO) -The Euro is the official currency of 16 of the 27 member states of the European Union (EU). The states, that collectively known as the Eurozone, are Austria, Greece, Belgium, Slovenia, Cyprus, France, Germany, Italy, Finland, Luxembourg, Ireland, Malta, Netherlands, Slovakia, Portugal and Spain. Today it is also considered as one of the largest reserve and most traded currencies in the world. Apart from this, based on IMF estimates of 2008 GDP and purchasing power parity among the various currencies, the Eurozone can be taken as the second largest economy in the world.
British Pound (GBP) -This currency is slightly unstable than the Euro and often referred to as “pound sterling” or “cable”. With swings that can encompass 100-150 pips, it isn’t unusual to see the pound trade as narrowly as 20 pips. Today it is one of the world’s most widely traded currencies, along with the United States dollar. It can be subdivided into 100 pence, where each single pence is generally termed as “penny”. Being involved in currency trading, it is important to understand that the value of the British Pound is driven by supply and demand for the currency.
Japanese Yen (JPY) – The Japanese yen (JPY) tends to trade under the identity of a carry trade component. This currency was introduced by the Meiji government to replace the previous complex system of the Edo Period, where there was no fixed exchange rate between the various coins used. In forex trading, the Japanese yen frequently moves inversely to some of the Asian stock indices. If you wish to trade in this currency with a little bit of a bite, you must focus on the crossover of London and U.S. hours (6am – 11am EST).
These are the few currencies whose trading might result you earn a great profit in forex market. You can trade in any of these currencies but ultimately you must know how to trade currency better and more effectively as this is the key to succeeding in money exchange trading.