Which Currencies are Traded and What are You Really Trading in the Forex Market?

What are You Really Trading in the Forex Market?

First, lets understand what we are actually doing when trading in the Forex market. What are you really selling or buying in this market? The short answer is, you are not buying or selling anything, you are speculating. All trades exist simply as data in a computer. The retail FX market is purely a speculative market, 80% of trades in the currency market are speculative in nature. No physical exchange of currencies ever takes place.

• While all transactions are simply computer entries, the consequences are no less real.

• Because currencies always trade in pairs, when a trader makes a trade he or she is always long one currency and short the other.

Which Currencies are Traded in the Forex Market?

Although some Forex Brokers trade exotic currencies such as the Thai baht or the Czech koruna, in general, the eight most traded currencies (in no specific order) are the U.S. dollar (USD), the Euro (EUR), the Japanese yen (JPY), the British pound (GBP), the Australian dollar (AUD), the Swiss franc (CHF), the Canadian dollar (CAD), and the New Zealand dollar (NZD).

Currencies Must be Traded in Pairs on the Forex Market

Currencies must be traded in pairs and there are about 18 currency pairs that are conventionally quoted by Forex market makers as a result of their overall liquidity. These pairs are:

<td >EUR/USD

USD/CAD	EUR/JPY
EUR/CHF
USD/CHF	EUR/GBP
GBP/USD	AUD/CAD
NZD/USD	GBP/CHF
AUD/USD	GBP/JPY
USD/JPY	CHF/JPY
EUR/CAD	AUD/JPY
EUR/AUD	AUD/NZD

These 18 currency pairs, along with their various combinations account for more than 95% of all speculative trading in FX.

 

 

Which Currencies are Traded and What are You Really Trading in the Forex Market Conclusion

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