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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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So you want to become a forex trader but aren't too sure where to begin to learning process. Well, you're in luck. In today's information age, the internet is an invaluable tool that can help you find just the type of forex trading training that you'll need to make it big in foreign currency trading.

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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%

See Also

• New to Forex?
  Learn more about the currency markets

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Win Big Time In The Forex market With This Amazing Forex Strategy System II
Learn Forex

How do I begin? Please give it to me SIMPLY.

1. The best advice on how to learn to trade profitably is to learn from experts with proven track records. Many learning styles are available to beginners at all levels: books, CDs, online courses, group seminars, even one-on-one mentors who will come right your home for a few days. We outline our Forex-Trader picks in Learning Forex Trading. Learning to trade from experts is worth every penny and has saved us untold thousands in mistakes.We would not recommend starting forex trading without any training. It is not hard to learn, nor difficult to trade successfully, but you must first provide yourself with a basic functioning knowledge of �the game you�re in�.

2. While you are learning you will need charting software to practice reading the Market. Charting is an indispensable tool that shows you in real-time data what the market is doing moment by moment and also what the market has done in the past. As you learn to analyze these charts you can determine what trades to enter and exit, where to set your stop losses, limits etc. There are several good charting software services that you can subscribe to online monthly. See our Forex-Trader tested Charting Software picks in Tools of The Trade.

3. Then, to perform your actual trades online you need a real-time �trading platform� to execute your �buys� and �sells� directly in the Foreign Currency Market. You obtain a trading platform from a Forex Clearinghouse that is connected real-time to the interbank market. There are many good Clearinghouses (also confusingly called Brokerage Firms, Market Makers, etc.) that provide you with the trading platform to trade the funds in the account you have opened with them. Before you begin trading your �real� money, while you are learning, you will practice on your own �demo account� with play-money in it, which will be provided to you by the clearinghouse you plan to trade through. The contractual relationship you enter into with your Clearinghouse is a very important one because the Clearinghouse you choose determines many trading features and financial advantages to you both as a trader and as an investor. Forex-Trader tested Clearinghouses are reviewed in Tools of The Trade.

We have outlined a Getting Started path with uncomplicated steps. This is the path that we would take if we were beginning trading over again today with �what we know now�. The products and services we mention in these steps are all ones that we have personally used for some time with consistent success. As always you are free to forge your own path, and if you do, happy hiking. There is a mountain of products and services try out, and if you find ones you like better we would love to compare notes with you.

Explain More About Charting Services

To trade successfully you also must have good charting software and instantaneous data feeds critical to helping you analysis and interpret the movement of currencies moment to moment so you know when/why to buy or sell � this you subscribe to monthly. You can get a 2 week or more demo to familiarize yourself with one that has the features you like. The costs also vary, and some companies require a year commitment. There are some free charting services offered through the clearinghouses, but they tend to lack the tools to be truly useful. There are also some costly proprietary Specialty Software charting �hybrids� which are market forecasters tools that look more like video games than charts.

Explain More About How Clearinghouses Work

A good clearinghouse (i.e.. your computer access/link to the live Forex Exchange Market) is the partner with which you trade the money you have deposited with them in your trading account. After trying and demo-ing many we have found a small handful that are truly excellent for the beginner (and continue to be excellent as you grow) � meaning user friendly, legally accountable to regulatory bodies, and offering fair costs (spreads) for their services/trading software platforms. There still are many worrisome ones practicing in this closing era of unregulated forex trading (new Commodities laws are imminent).

The topic of matching the right clearinghouse for your needs is discussed more in Tools of the Trade, because it depends on a number of factors � how much you can open an account with, how much the clearinghouse profit spread, what your liquidity needs are, your minimum/maximum stop loss and margin requirements, even where you live and how much time you have to give to trading in a 24 hr. day.

How Much Does it Cost to Begin to Trade?

Learning to trade will entail the cost of books and whatever traiining method you choose. It will also include a reliable computer with a minimum 128 Mb of memory to run the charting software and trading platform. Ongoing �costs of operation� include the monthly costs of high-speed internet, charting software, the email forecasting subscriptions � plan on spending $150./mo. up for ongoing costs.

What about Pooled Clearinghouse Accounts to Trade with More Leverage?

We strongly do not recommend pooled accounts in any circumstance. Perhaps you are considering self-trading a pooled- together family account because it would give you a perceived advantage of more leveraged funds to trade (50:1 up to 100:1 leverage) � any risks of loss represent a potential risk to family relationships, and for this reason alone we do not recommend aggregating with family or friends.

However much worse are the too-numerous negative experiences of people allowing their investment funds to leave their control to become part of a �managed� pooled account. Not only is it a very risky investment idea, it is illegal for anyone to �pool� accounts without compliance with SEC (a USA Securities Exchange Commission) or international equivalent license. Never relinquish direct control over your money/trading account to anyone (i.e.. the ability to make withdrawals, deposits etc. directly by your own authority into your own account).

A good fund manager, if you do choose to go the (legitimate) Managed Account route rather than the Self-Trader route, will make certain you have your own �segregated account� in your own name in a bank or brokerage firm. These individual segregated accounts can still be traded together as though they were in a single account by a designated trader as long as the clearing house uses a trading platform that allows it. You, as the investor/account holder, have direct access online to your account activity at all times, and direct control over your own account in your own name (just like a bank account). The importance of this, for the safety of your funds, cannot be over emphasized

From http://www.forex-articles.net/article-17.html

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The FX interbank market is a global network of the world�s banks with no centralized location for trading. Much of the business is conducted over the-phone or electronically bank-to-bank. The FX market is a 24-hour-per-day market during the FX business week. The day starts in Asia, extends over to Europe and then into the U.S. daytime trading hours. Currencies are traded around the world, around the clock, from Monday morning (Sunday afternoon Chicago/New York time) in New Zealand/Asia to the close of the business week on Friday afternoon in Chicago/New York.
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Forex charting is nothing but a software program specially designed to trade forex efficiently and effectively. Forex charting makes understanding the rises and falls of rates clear and simple. As a tool for your investments, Forex charting comes in handy all the time. You need to see where the market is going and, as a result, understand what leads to these fluctuations. Studying Forex charting helps you anticipate the occurrences that will spurn the next change.

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