Broker Currencies - InvestingOnline.com

Currencies

The trading of forex is the largest, most liquid international market in the world. People from all over the world participate in this market using different currencies to trade various currency pairs. Certain brokers will only accept the main currencies to fund trader accounts, while other accept various types of currency. On this page we have listed various currencies in which brokers accept, so that you can trade and be apart of the lucrative forex market.

What Is A Currency Pair?
A currency pair is the quotation of the relative pricing structure of one type of currency against another type of currency, in which both are traded in the foreign exchange market (forex). The value of a currency is determined as a rate in comparison to another currency. An example of one of the most popular currency pairs is the EUR/USD. The first currency in this pair (Euro) is called the base currency, while the second currency (US Dollar) is called the quote currency. What this currency pair indicates is how much of the quote currency is needed to buy one unit of the base currency.

In the trading of forex, a trader simultaneously purchases one currency and sells another. Since these actions occur at the same time, a currency pair can be thought of as one unit or instrument that is bought or sold. When you buy a currency pair, you are purchasing the base currency while selling the quote currency, and vise versa when selling a currency pair. When buying, the buy price is called the ‘bid’, in which it represents how much of the ‘quoted currency’ you need to buy, to get one unit of ‘base currency’. When selling, the sell price is called the ‘ask’, in which it represents how much ‘base currency’ you will get when selling the ‘quote currency’.

There is a large variety of currencies in the world and all of them can be traded on the foreign exchange market. However, not all the currency pairs are traded equally. Some are traded much more frequently than others, thus creating 3 different categories of currency pairs; Majors, Minors, and Exotics.

Major Currency Pairs
Currencies that are trade most frequently against the USD are considered to be ‘Major’ currency pairs. This is largely due to the USD being the ‘world currency’. These include the EUR/USD, USD/JPY, GBP/USD, AUD/USD, USD/CHF, NZD/USD and USD/CAD. These ‘major’ currencies have the most liquid trading markets, the lowest spreads, and are tradeable 24 hours a day, 7 days a week.

Minor Currency Pairs
Currencies who are not traded against the USD are considered to be ‘Minor’ currency pairs and are also referred to as ‘Crosses’. These currencies are not as liquid, resulting in slightly wider spreads. However, the markets are sufficiently liquid to trade these pairs nonetheless. Some examples of these pairs include the EUR/GBP, GBP/JPY and EUR/CHF.

Exotic Currency Pairs
These currency pairs are a combination of a major currency trading against a currency from an emerging yet smaller economy from a global perspective. These pairs are traded the least often, resulting in the widest spreads of all. However, there is still money to be made, thus having a market to trade these currencies. Some of the common exotic currency pairs are the EUR/TRY, USD/SEK, USD/NOK, USD/DKK, USD/ZAR, USD/HKD, and USD/SGD.

How Many Currency Pairs Should You Trade?
This is a question asked by many beginner traders. There are so many options out there in which can be highly profitable. However, it’s important to not get over your head and stick with a manageable number of currency pairs to trade. One option would be to just focus on one currency pair to develop your skills, thus increasing your chance of profiting consistently over time. Another option is to use a basket of currencies ranging from 5 -10 or even more. By doing this you open yourself up to the probability of more profitable opportunities. Which ever method you choose, be sure to have a manageable strategy and method to trading the currency pairs.