Currency investing is the analysis of the current situation and market forecasting, the conclusion of transactions with currency pairs on it. The latter are the main instruments that represent the ratio of two national currencies. A huge selection of newcomers knocks, because of what they choose the first available options, losing all the money.
What does an investor need to know about currency pairs?
Forex (English Foreign Exchange - "foreign exchange") - the international market in which the commodity acts as a currency. On it every day one monetary unit is bought or sold for another. Investor's profit - the difference in rates between them.
Today, the Forex market is an integral component of the global economy. It allows for the exchange of capital between different countries. In 2017, the Bank for International Settlements conducted a study: the volume of transactions per day reached 5.8 trillion dollars. The largest Swiss financial holding UBS Group AG predicts growth to 10 trillion by the end of 2020.
When investing on a stock exchange, a person buys one currency and sells another. That is why in the Forex market, participants use the concept of “currency pair”. In each pair, regardless of its group, there is a base (first) and quoted (second) currency.
What are the currency pair groups?
EURUSD and GBPUSD are well-known pairs that are ideal for novice investors to open positions. The American dollar, which is the main reserve currency, is present in them wallpaper.
There are dozens of other tools for which work on the currency exchange can bring profit. There are three groups on the Forex market:
Majors are currency pairs that outperform all others. They consist of world currencies that are constantly on the ear, they are distinguished by simple analysis.
These include EURUSD (the lowest level of spread) and GBPUSD (high volatility). In total there are 7 main pairs, in each of which there is an American dollar.
Crosses is a large group that stands out due to the absence of US dollar pairs. Despite the fact that they are less active and liquid, they should pay attention.
The largest volume of transactions in the Forex market is between EURJPY, EURCHF, EURGBP. Some prefer to actively use GBPJPY and CHFJPY.
Exotics - currency pairs, the main features of which are the large size of the spread and high volatility. Sharp changes in the rate due to the lack of stability of the representatives of this group in relation to the more popular currencies.
There are USDSEK, USDZAR, USDNOK and other pairs on the currency exchange. They are characterized by the complexity of forecasting, so they are not particularly popular in the world.
What are the best currency pairs?
Investing in the Forex market, each uses its own methods, strategies, tools. Some prefer to look for the best options in practice, others choose the proven tools, trying to ensure the security of their money.
Below are 3 pairs that will help you simplify your work on the currency exchange due to the availability of analytical advice and data:
- EURUSD. The low level of the spread makes it popular with both beginners and experienced players. People who do not want to risk, choose it as the main currency pair. Avoid mistakes will help articles and financial data on forums, thematic sites.
- USDGBP. It is popular due to high volatility, respectively - profit. This advantage is a disadvantage at the same time, as the risks increase.
- USDJPY. There are two main advantages - low spreads and the ability to follow a smooth trend. In the Asian session, it overtakes even the popular EURUSD instrument.
It is possible to determine a suitable currency pair exclusively in practice, because each investor has his own baggage of knowledge and tools. Spraying on 5-10 options will lead to difficulties in studying the graphs, increasing the risk of missing an important component of technical analysis.
In the Forex market, the number of investors is growing, which are concentrated on one instrument. Due to a certain specialization, they can spend more time analyzing using the data obtained for currency investment. Gradually, you can increase the portfolio to obtain a smooth yield curve when investing in the currency exchange.