Are you looking to dive into the forex market and trade for a profit? First, it is crucial to understand the forex market dynamics and the essentials of technical analysis from our previous article on the basics of forex trading.
A trader needs to understand the essential terms related to forex. You’ll encounter many words you haven’t heard of when trading currencies. Here is the information in a nutshell:
The bid is the price your broker will purchase at from you, while the ask is the price the market or broker is willing to sell to you. The spread is between these two, the price difference between the bid and ask price. To buy forex, you trade with a base currency, most likely the currency of where you’re living. When you invest in a currency pair, you’ll experience price movements. Pips is a popular term for price movement. Pips refer to the slightest possible movement a currency can make in price. Small price movements don’t necessarily make a lot of money, so traders often use leverage, money lent to increase profits.
You can read more about the fundamentals of being a forex trader. This article will go over the best currency pairs to trade now.
USD to CHF Trading the US dollar and the Swiss Franc (CHF) is popular among those trying to protect their assets during volatility. The Swiss Franc is considered a ‘safe’ currency and does well in times of instability. Other currencies tend to lose value while the value of CHF increases. Recent developments have created opportunities for traders to swing trade the Swiss Franc when bad news hits the market and people look to allocate assets to the safest currency possible.
USD to EUR Many traders consider the dollar to euro to be one of the most traded currencies globally and, therefore, it has a lot of volume. In addition, the euro is seen as a relatively stable currency as it is the primary currency for 19 of 28 European Union members.
The euro tends to be susceptible to political occurrences, like central bank interventions. The European Central Bank (ECB) is always looking to manage and oversee the euro in a tight frame. It implements European countries’ economic and monetary policy with the intention of keeping prices stable. Combined with high volumes, this can cause significant volatility, which can be interesting to monitor for forex traders.
AUD to USD Trading the Australian dollar against the US dollar is attractive to traders because of the close trade relationship that the US has with Australia. In addition, the Australian dollar is heavily correlated with the commodities market, as Australia is one of the biggest exporters of coal and iron.
Due to the closely related economic ties between Australia and the US, interest rates can cause big swings in the value of the respective currency. As a result, differences in monetary policy and interest rate hikes can cause volatility in the market, making it an exciting currency to trade, especially for traders closely following macroeconomic news like interest hikes, and traders with experience in the commodities market.