As  you know, The Forex Currency Market is based on the buying and selling of currencies of certain countries. It is based on the exchange rate; this means the purchase of one currency in exchange for the sale of another currency, simultaneously. For that reason the currency market is always traded in pairs. Before operating in the foreign exchange market, it is important that you start to understand the basic terminology of the market and know how to interpret correctly the currency market quotations.

What are pairs?

The Forex market trades by buying and selling currencies  from different countries. A pair is the combination of two different currencies that are used to take positions on the Forex market. Usually the first currency is known as the base currency, as this is not moving and the second currency is called counter currency since it will comply with the pair. The base currency is also known as primary and base coin currency as currency trading. The base currency will always be = 1 and the value will vary depending on the pair base coin you choose and the value this has in the international market.

It is important that you know what are the main currencies traded in Forex and its acronym in English, since at the time of operation usually only use the acronym. Later we will tell you what the most used pairs are:

• AUD = Australian Dollar
• CAD = Canadian Dollar
• JPY = Japanese Yen
• EUR = Euro
• GBP = Great British Pond
• USD = U.S. Dollar
• CHF = Swiss Franc
• NZD = New Zealand Dollar

The following is an overview to know about the most traded currencies in the market:

• The U.S. Dollar: USD

Currently, there are other major currencies to the dollar, as the Euro, Japanese Yen, the Pound Sterling and Swiss Franc moving against the U.S. currency. But the dollar is known as the World’s currency. Most currencies are quoted in dollar terms and some of the currencies of other countries are closely linked to it. This currency became the leading one at the end of WWII, but today by the global economic crisis and recession in the U.S. has ceased to be.

• The Euro: EUR

The euro is the official currency of 16 of 27 member states of the European Union as of 2009.  The states, known collectively as the Euro zone, are Austria, Belgium, Cyprus, Slovakia, Slovenia, Spain, Finland, France, Greece, Holland, Ireland, Italy, Luxembourg, Malta and Portugal. The currency is also used in five other European countries, both official and non-agreed form and thus is in daily use by about 327 million Europeans. After its appearance in December 1999, the Euro replaced the German mark and quickly became the second currency in the world and every day it gain more acceptance around the world. The Euro has a strong international presence, regardless of exposure to various political economic factors that may affect them.

• Japanese Yen: JPY

The yen was fixed to U.S. dollar exchange rate of 362 yen per dollar since April 25, 1949 to 1971. Then it has appreciated significantly. Currently the exchange rate is about 90 yen per dollar, or about 118 yen per euro. This is the third most used currency in the world for this kind of transaction, making the market very liquid 24 hours a day. Much of the eastern economy moves according to Japan, the yen is quite sensitive to factors such as agricultural production in eastern and technological factors.

• The British Pound: GBP

The pound was originally the weight value of a pound of sterling silver (hence it’s called “sterling”). This was the reference currency to the beginning of World War II, most transactions take place in London today is the largest international market in the world despite its low volume during operation in the  American sessions.

• The Swiss Franc: CHF

The Swiss franc is legal currency  in Switzerland and Liechtenstein. Although its weight in the global economy cannot be compared to the euro or the dollar, the stability of the country they belong to makes be taken into account as a “safe haven”, particularly after the assessment as to the European currency from April to September 2000. Its value is around 2/3 of a euro. This is the other major European currency that is not part of the Euro but neither is part of the G-7, but in turn is favored in terms of political uncertainty that may involve the economic community. Practically it can be said that the Swiss Franc, behaves quite similar to the Euro against the dollar.

How to know what pairs you should trade?

The best opportunities for a successful trade are those where you trade with currency pairs are usually more used on the market and that, therefore, are those that are highly liquid.

For example, you can buy Euros with Dollars, anticipating that the Euro will increase its value against the dollar. If the euro rises against the dollar, you sell the position and then you earn money.

Another more specific example, when trading with the following pair: USD / EUR = 1.5 and you purchase a pair; this means that for every 1.5 Euros that you sell, you get $ 1. So, if you sold the currency pair, you receive 1.5 Euros for every $ 1 you sell.

The four most widely used currency pairs in Forex trading are:

• U $ Dollar / Japanese Yen (USD / JPY)
• Euro / the U.S. Dollar (EUR / USD)
• Pound Sterling / U.S. $ Dollar (GBP / USD)
• U $ Dollar / Swiss franc (USD / CHF).
• The U $ Dollar / Canadian Dollar (USD / CAD)
• The Australian dollar / U.S. $ Dollar (AUD / USD)

28% of global transactions relate to the Euros / dollars pair, 18% against the dollar / yen and 14% with the pair Pound / dollar.

These are pairs that are advised to use due to high liquidity of use within the market. It is recommended that use be limited to only one or two different pairs at the same time for best results, for novice traders. When being a skilled trader you can take risks and experiment with different positions opening up several pairs in the market.

Trade the currencies of each session for best results into trending markets.  Better yet if it is during first 2-3 hours of the opening and/or closing of each session.

Finally do not forget, you can become a successful trader if you receive specialized education and constant knowledge.

If you would like to have more information please click here: Forex Trading

Just how important is an automated system to the Forex trading system?

Before we answer that question, let us first find out how big the trading market is. From there, you can get to know the importance of automated systems for the Forex market.

It is real that Forex is the most extensive market around the world not just in terms of average daily turnover and average revenue per trader. It is the largest market in terms of participants.

You name it, we’ve got it. See the following:

BANKS- they are not just for saving money and lending capital to enterprisers, but they are also one of the greater players in Forex market. Banks cater both to large quantity of speculative trading and daily commercial turnover. Well-established banks can trade billions of dollars worth of foreign currencies. Some of the trades are accepted on behalf of their clients, but most are through proprietary desks.

COMMERCIAL COMPANIES- these commercial companies trade small amounts of foreign currencies compared to larger banks and their trades produce small and short-term effect on the market rates. However, the trade flows from transactions made by commercial companies are vital factors with regards to the long-term direction of the exchange rate of a certain currency.

CENTRAL BANKS- central banks play an important role in the Forex market. They have the control over the supply of different currency, inflation, and interest rate. Additionally, they have also official target rates for the currencies that they are handling. They are responsible for stabilizing the Forex market by using foreign exchange reserves. Their intervention is enough to stabilize a certain currency.

INVESTMENT MANAGEMENT FIRMS- these firms commonly manage huge accounts on behalf of their clients such as endowments and pension funds. They are using the market to promote transactions, specifically in foreign securities. An investment manager bearing an international equity portfolio needs to purchase and sell several pairs of foreign currencies to pay for foreign securities purchases.

RETAIL FX BROKERS- they manage a fraction of the total volume of Forex market. A Forex broker estimates retail volume of between 25 to 50 billion dollars each day, which is presumably at 2% of the total market volume.

SPECULATORS- these are individuals who purchase and sell foreign currencies and profit through variations on its price as opposed to popular methods such as interest and dividends. They play the important role of transferring the risk to individuals who do not wish to bear it.

Only in Forex market, there are already six major players partaking on the $1.8 trillion worth of daily turnover. With a large number of traders in the market, it is becoming a real need to switch from manual to automated Forex trading system.

Among the major Forex players mentioned above, the automated trading system is of great advantage to the speculators. Since they focus on the price fluctuations of several foreign currencies in order to profit, the real time data analysis will help them identify trades that will give advantage to them.

There are several automated Forex trading systems available in the market. There are also automated Forex systems that are offered for free or as part of their trading account acquired from their Forex brokers or agents. That kind of complimentary system packages are typically elementary trading system. If you are looking for more functions, you can avail of it through additional payments.

There are two kinds of automated Forex trading system. These are discussed in the following:

Desktop-based system- all Forex-related data are stored on your desktop’s hard drive. This system is unpopular to traders due to the susceptibility of all data to computer virus, contamination and security problems. Worse, when the computer malfunctions, all vital information might be lost and cannot be retrieved (unless you have some back-up files of your own). However, it is little expensive compared to the other types of automated trading system.

Web-based system- the security of your Forex account and other data are supplied by your web-based provider. These are hosted on secured servers. It is also convenient considering that there will be no software required and it is universally compatible with your Internet browser.

You may also try different automated trading system demos first so that you will be able to opt for the automated system that suits your personal preference and needs.

Even if you are just a small-time trader, it will be an advantage for you to use an automated Forex trading system for your future trades.

If you would like to have more information please click here: The Forex Market