What is Currency Trading?

What is Currency Trading?

Currency trading is a market that is operating 24 hours – Monday to Friday evening. After Sunday evening it resumes again. Among these trading sessions, you have 3 different and separate continents with their own sessions for currency trading; these include – Europe, Asia & the United States.

These market hours and sessions are where main currencies are constantly trade during those times, bringing in the fact of currency pairs, which are traded more heavily during these sessions. Based on the U.S. Dollar ($), the traders in the United States trading sessions continue to remain with those pairs because they usually find the most volume whilst trading.

When it comes to currency trading, they are always traded in sizes, we call these ‘Sized lots’, there is ‘Micro Lots, Mini Lots & Standard Lots.’ The Micro Lot is One Thousand units (1000), units of a currency traded off a trader’s base currency. A mini lot is Ten Thousand (10,000) units of your base currency and the standard lot is One hundred thousand units (100,000) units. For example, if a trader has an American (U.S.) account, where their subsidy is procured in the United States dollar, if they use a micro lot, it translates to One Thousand Dollars ($1000) off their base currency.

Pairs and pips

Another factor to understand about currency trading is; Pairs & Pips. In currency trading, it’s always done in Pairs. When compared with the stock market, stocks are always bought and sold in single stocks, where one currency is bought and sold in another market. But with Currency Trading, it’s always done in pairs. A Pip percentage is done in small increments of trading. A single pip is equal to 1%. When we bring in the addition of ‘Lots’ it can be broken down in this format;

  • 1 Pip is equivalent to 10 cents in a micro lot per price of stock.
  • 1 Pip is equivalent to $1 (One Dollar) in a mini lot per price of stock.
  • 1 Pip is equivalent to $10 (Ten Dollars) in a standard lot per price of stock.

These make the losses easier to handle due to the unknown future results of trades for traders, helping these investors to manage their investments. Trading is not simple and risky, there is also the fact that trading options are kept lesser by traders to help managing the difficulty.

Country currencies

Now Pairs are limited to 18 currency pairs in terms of volume of currency trading, yet there is hundreds to thousands of tradable stocks that are available in the Global Equity Markets. Out of these 18 different country currencies; the most commonly or favorably traded currencies are the following;

  • U.S. Dollar (USD)
  • Canadian Dollar (CAD)
  • Euro (EUR)
  • British Pound (GBP)
  • Swiss Franc (CHF)
  • New Zealand Dollar (NZD)
  • Australian Dollar
  • Japanese Yen (JPY)

So now, how these currencies move; it’s simply explained like this, when there is a fluctuation of U.S. dollars worldwide, the value of the Dollars goes up,. And vice versa the value of the Dollars drops when there is too much going around worldwide.  A large number of stock traders/investors are gaining an interest in Currency Markets because there is a greater force at hand shifting the stock market. That force is also shifting the Currency Market, especially supply and demand. Interest rates are also factors that play a role in the shift, geopolitical tensions, and globally affluent economic data. These all play a role in the currency market prices.

Many investors try to find the best and most strategic ways and strategies to trade. As it is said to sum up, currency trading is very difficult. Basically you always find that new people who are learning to trade or want to get involved in it including old & present investors/ traders are always practicing their skills. Currency trading is still popular and you can always find free virtual accounts online to help you practice and learn different techniques of trade to make you successful.

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