A bried idea about the trading instrument in Forex market
When anyone learns about the Forex market for the first time, a question will immediately come to his mind is what is traded here. The answer is money or currency which is as simple as the question. In the Forex market, no physical object is bought or sold. At first look, the Forex market may sound confusing and therefore, we’ll analysis the trading system of the Forex market.
You may take buying currency as buying a share from a specific country. It is like how we buy shares in a company. From the price of the currency of any country, we can get an idea of the condition of the economy of the country. When you buy a certain country’s currency, you are buying a share of that country’s economy. So, before buying currency you have to learn properly about their currency.
Buying and selling the asset
If you buy Japanese yen then you are expecting the Japanese economy will flourish. So, you should choose the currency of the country in which the economy is growing well and can grow more. The difference between the currency rate in the two countries shows the contrasting pictures of their economy. Remember, you will get benefited only when you understand the exchange rate of a currency versus other currencies.
After having a proper understanding of how to invest and where to invest, you should buy the currency of your choice and should wait for the proper time to sell. By proper time, we mean the time when there is the chance of earning more profit. There are a huge number of options of currencies you can trade. As a trader, it is up to you that from this large amount of options which you want to choose. For instance, you can start trading bitcoin which is a digital asset. But if you want to trade bitcoin or cryptocurrencies, you must check with your broker whether they offer this asset or not. In general, high brokers like Saxo offers cryptocurrency trading to their clients. Now let's discuss the major currencies in the world.
Major currency pairs
If you are a new Forex trader then you can start trading with the major currencies. There are a total of 8 major currencies, they are EURUSD, GBPUSD, AUDUSD, USDCAD, USDJPY, NZDUSD, GBPUSD, and EURGBP. Now, you may have the question that why they are called major currencies. They are called so because they are representative of some of the world’s largest economy and so, they are the most traded currencies in the trading market.
To know the major currencies well we need to know them properly by their symbol, country, currency name, and nicknames. The currency of the United States is Dollar and its code is USD, where the currency of the Eurozone is known as the Euro and its code is EUR. Yen is the Japanese currency and JPY is their currency code and in Great Britain, their currency is known as Pound and its code is GBP. CHF is the code of Franc which is the currency of Switzerland.
Currency symbols consist of three letters, where the first two letters indicate the name of the country, and the third letter symbolizes the first letter of the currency’s name.
The three-letter code that we use for currency was established by the International Organization for Standardization (ISO) in 1973. For this reason, these codes are also known as ISO 4217 Currency Codes.
To understand it more easily we can take the example of AUD. Here, AU stands for Australia, while D stands for dollar. And if we can see the nick nickname buck for USD. But here we like to inform you that it is not the only nickname. There are some other nicknames too. Greenbacks, benjamins, paper, loot, cheese, bread, and cash are some of the nicknames.