Coming into the world of forex is not always easy. You have to make sure that you understand all of these concepts and they can quickly spiral out of control. Learning is not easy, but it’s the steps that you take at the beginning that will really determine everything for you as an investor. What’s the right way to go? Well, that just depends on your goals and dreams. Some people find that they’re going to have to really dig in deep and work hard in order to make gains as a forex investor. But remember — if it really was going to be easy, it wouldn’t be worth having. Everyone would want to do it, and it just doesn’t work that way. If you want to last an investor for the long run when it comes to forex, these terms really do make all of the difference in the world.
So, where do we begin?
Well, you have to understand that when you’re trying to invest in the forex market, what you’re really doing is trading money. Hard currency, though not “hard” in the physical sense. You’re essentially buying currency like you would buy a share in a particular country. The market translates price into a direct reflection of thoughts about the health of an economy. So when you purchase say, the Canadian Dollar, you’re buying a share in that country’s economy. You’re saying that the economy of Canada is going to be fine, and will grow as time passes.
The exchange rate of a currency versus other currencies is the market’s reflection of the condition of both country’s economies. In terms of USD/CAD, it would be how strongly you feel that the US economy is compared to Canada’s economy. That’s essentially why exchange rates fluctuate so much.
Does that make any of those old financial news broadcasts any clearer in your head’ because when we first started traded forex and really saw what the market was capable of, it started to all make sense.
There are major currencies and minor currencies. IF you really want to take it slow as a newbie, it’s a good idea to stick wit the major currencies. They have enough volume to keep you busy, so you won’t mess up things too much.
Major currencies include the USD (United States Dollar, often nicknamed the “Buck”), the EUR (Euro, the currency of all Euro zone countries and nicknamed “Fiber”), the JPY (Japanese Yen, just “Yen”), the GBP (Great Britain Pound, “Cable”), CHF (Swiss Francs, “Swissy”), CAD (Canadian Dollar, “Loonie”), AUD (Australian Dollar, “Aussie”), and the NZD (New Zealand Dollar, “Kiwi”).
Currencies are traded in pairs, so you will see them reflected that way — EUR/USD, USD/JPY, USD/CHF, and so on.
Currency pairs that don’t contain USD are considered the cross currency pairs, or “minor pairs”. Popular minors include EUR/CHF, EUR/GBP, EUR/CAD, and NZD/CHF.
The market for forex is huge — the forex OTC (over the counter) market is running 24 hours a day. It’s spread all over the globe with no central location. That’s a pretty big deal.
We’ll leave it here — you have quite a bit of forex knowledge to digest! Good luck!