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The Seven Most Traded Currencies in FOREX

Currencies are traded in dollar amounts called �lots�. One lot is equal to $1,000, which controls $100,000 in currency. This is what is known as the "margin". You can control $100,000 worth of currency for only 1,000 dollars. This is what is called �High Leverage�.

Currencies are always traded in pairs in the FOREX. The pairs have a unique notation that expresses what currencies are being traded. The symbol for a currency pair will always be in the form ABC/DEF. ABC/DEF is not a real currency pair, it is an example of a symbol for a currency pair. In this example ABC is the symbol for one countries currency and DEF is the symbol for another countries currency.

Here are some of the common symbols used in the Forex:

USD - The US Dollar EUR - The currency of the European Union "EURO" GBP - The British Pound JPN - The Japanese Yen CHF - The Swiss Franc AUD - The Australian Dollar CAD - The Canadian Dollar

There are symbols for other currencies as well, but these are the most commonly traded ones.

A currency can never be traded by itself. So you can not ever trade a EUR by itself. You always need to compare one currency with another currency to make a trade possible.

Some of the common PAIRS are:

EUR/USD Euro / US Dollar "Euro"

USD/JPY US Dollar / Japanese Yen "Dollar Yen"

GBP/USD British Pound / US Dollar "Cable"

USD/CAD US Dollar / Canadian Dollar "Dollar Canada"

AUD/USD Australian Dollar/US Dollar "Aussie Dollar"

USD/CHF US Dollar / Swiss Franc "Swissy"

EUR/JPY Euro / Japanese Yen "Euro Yen"

The listed currency pairs above look like a fraction. The numerator (top of the fraction or "left" of the / however you want to SEE it) is called the base currency. The denominator (bottom of the fraction or "right" of the /however you want to SEE it) is called the counter currency. When you place an order to buy the EUR/USD, for instance, you are actually buying the EUR and selling the USD. If you were to sell the pair, you would be selling the EUR and buying the USD. So if you buy or sell a currency PAIR, you are buying/selling the base currency. You are always doing the opposite of what you did with to base currency with the counter currency.

If this seems confusing then you�re in luck. You can always get by with just thinking of the entire pair as one item. Then you are just buying or selling that one item. Thinking like this will still enable you to place trades. You only need to be aware of the base/counter concept for Fundamental Analysis issues.

So why is it important to know about the base/counter currency? The base/counter currency concept illustrates what is actually taking place in a Forex transaction. Some of you reading this, know that short-selling was restricted in the stock market *(Short-selling is where you sell a stock/currency/option/commodity first and then try to buy it back at a lower price later). But in the FOREX you are always buying one currency (base) and selling another (counter). If you sell the pair you are simply flipping which one you buy and which one you sell. The transaction is essentially the same. This allows you to short-sell with no restrictions.

You want to be able to short-sell with no restrictions so you can make money when the market drops as well as when it rises. The problem with traditional stock market trading is that the market has to go up for you to make money. With FOREX trading you can make money in all directions.

Omar Vargas
FOREX Trader and Freelance writer. http://www.1-forex.com

Quick Forex Ideas

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Before you decide to enlist the services of a foreign currency broker, take the time to do some research on the broker and / or brokerage firm. Foreign currency trading has enough pitfalls to avoid without adding a shady broker to the equation. You can make a lot of money trading foreign currencies, but if what the broker says sounds too good to be true, chances are it is.

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Many factors affect Forex trading. It is critical to know and understand the various factors that cause the Forex to fluctuate from day to day. The foreign exchange market will change depending on the economic factors that play a role in the movement of currency.
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Forex Trading Systems News

Asian Morning Update 4th April 2008

Thu, 03 Apr 2008 18:24:42 -0500
Dollar bearish sentiment is not quite so one way now…

European releases overnight:

February Forecast Actual
Euro-zone Retail Sales (MoM) +0.2% - 0.5%
Euro-zone Retail Sales (YoY) +0.0% - 0.2%

Germany’s rather soft retail sales earlier in the week clearly reflected in the Euro-zone numbers released yesterday. However, very clearly the shortfall against forecasts shows that the lack of confidence to spend has spread across continental Europe in general and is not confined to a tight group of member countries.

As mentioned before, this will be the next real risk that could generate the next shock. As things stand now, European banks are generally able to cope with the market upheavals, perhaps with the exception of Bayerische Landesbank. However, what remains unclear whether there is a layer of smaller banks that may be vulnerable to any further shocks.

One shock of a hedge fund or LBO going down could tighten credit conditions further and that remains the risk while consumers fail to keep bending the plastic.

Remember that most recessions are caused by consumers failing to spend…

States releases overnight:

March

Forecast Actual
U.S. Initial Jobless Claims (29th) 365K 407K
U.S. Continuing Claims (22nd) 2937K
U.S. Non-Manufacturing ISM Composite 48.5 49.6

Once again the U.S. numbers come in mixed, but that implies that something is not as bad as expected. Yesterday’s non-manufacturing ISM came in solidly above forecasts and maintains the general stable series of figures seen this week.

The jobless claims were the fly in the ointment. Cue the non-farm payrolls figure tonight which consensus forecast sees a 63K increase in jobless. This monthly ritual so often keeps the market nervously twitching for the few days prior to release and this week has been no different.

All too often the numbers come and go without as much as a whimper from the market. The only problem is knowing which it will be.

Bernanke’s comments over the past two days have provided no more than we already knew so the Asian and European session will probably extend the general lack of direction until release.

Whichever way the Dollar reacts there doesn’t look like being excessive follow-through in either direction with the market now acknowledging a greater duality of risk from both sides of the Atlantic. Add to that the fact that the fiscal stimulus looms and most consider there to be a more than 50:50 chance of seeing a stronger H2 from the States and we can say that the prior bearish sting in the tail is close to finding an antidote…

More later once the daily analysis has been done…

There following releases are due from Asia due today:

Australia February Retail Sales (MoM) +0.3%