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Thread: Currency Pairs and Their Characteristics

  1. #1
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    Default Currency Pairs and Their Characteristics

    Of course, we can’t trade currencies without knowing about them. There are a large number of currencies that traders can choose from for establishing their trades and portfolios, but most currency traders will concentrate on a few of the more widely traded, and liquid pairs such as the EUR/USD, GBP/JPY, or USD/CHF, which are all currencies of major powers. It is possible to divide currencies into many different groups based on the criteria chosen, but in general currency account position and interest rate policies of central banks are the most important values for classifying them.
    If we try to divide currencies on the basis of financial soundness and economic policies, the following is one plausible categorization.

    Reserve Currencies
    These are the currencies of nations which have a dominant role in global economic transactions. The European Union, Japan, the United States are the important powers the currencies of which fill the coffers of central banks around the world. Among those, the role of the Japanese Yen as a reserve currency has been diminishing since the 90’s, while that of the Euro has been increasing continuously since the launch of the currency. Among all those changes however, the US Dollar has remained as the one major currency that has the greatest preponderance over everything else in central bank currency allocations. With about two thirds of global forex reserves denominated in the dollar, the USD is the reserve currency of the world.
    For traders, an important rule of thumb is that reserve currencies as a group tend to depreciate in times of boom, and to appreciate at times of economic trouble. This is a generalization; needless to say there is a degree of variation among the behavior of different currencies, but due to the financial structure of the global economy, economic activity usually leads to abundant supply of reserve currencies during robust economic growth.

    Commodity Currencies
    Currencies such as the Australian and Canadian Dollars, the Brazilian Real, the South African Rand, or the Russian Ruble, which are the monetary units of commodity exporting nations, are called commodity currencies. There’s a great degree of diversity among commodity currencies in terms of trade balance or economic sophistication. However, due to the large currency inflows generated by proceeds from the sales of commodities, the value of these currencies is strongly dependent on the buoyancy of global commodity market.

    Exporter Currencies
    Currencies of nations like Singapore, Japan, China, with large forex reserves accumulated through exports, are called exporter currencies. The value of these currencies is related strongly to the health of the global economy. As they depend on foreigners for economic buoyancy, any disturbance to the health of the global financial system can have outsized consequences for these nations. Nonetheless, due to their large forex reserves they are well-placed to withstand the impact of any economic shock better than most of their peers.

    High-risk currencies
    These may also belong to any of the other categories. High-risk currencies are the currencies of nations with high deficits (budget or trade), and high interest rates. Examples are Romanian Leu, currencies of Baltic nations, or Turkey. These currencies appreciate at times of boom, as capital from developed economies is directed to their assets, and depreciate during recessions and crises, as global capital discards risky assets.

    Conclusion
    Although the descriptions above may sound simple and brief, they already contain much of the basic concepts that are important for currency traders. The key to a successful trading career is carefully evaluating the widely available data, and establishing a disciplined and simple strategy which can be used to exploit the information for profit. How do we evaluate the data? What kind of tools do we use to make sense of the widely available and complicated information that we must sort out to generate trading signals? This is the subject of forex analysis, which we’ll discuss in the next chapter.

  2. #2

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    I am often trade on major pair like as eurusd and usdjpy and open another pair too, but in trading only choose one pair to traded which if using many pair to traded hence sometime making regret after one pair giving profit while another pair giving loss

  3. #3
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    I have very wide space of choosing currency pairs in my live chart! Even CFDs, Indices, Stocks and Commodities are available to me from flexible broker trade24! In my demo, I practiced with more than 50 trading instruments! By the way, right now I am using only 15 pairs in my live chart, besides till now I am practice with 8 trading instruments in my demo!

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    Each currency pair has its own specific behavior, movement, and detail that traders recognize and understand as their experience level grows. In fact, focusing on trading currencies and pairs that a trader knows intensively can provide a winner’s edge. Learning the characteristics and personalities of major currency pairs will make you a smarter trader. There is a very extensive list of currencies that are traded on the forex market. ECNCAPITAL.COM can give you best information of currency pairs & their characteristic with their reliable analysis & news.
    Last edited by makran; 01-31-2017 at 07:11.

  5. #5
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    EUR-USD is the most liquid currency pair because it has the highest trading volume. However, you will not have any liquidity problem in the forex market because it is such a huge market. It is not like the stock market that sometimes you cannot find a buyer for the shares that you have already bought and you want to sell. ECNCAPITAL can give you the exact view of currency pairs.

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    There are a large number of currencies that traders can choose from for establishing their trades and portfolios, but most currency traders will concentrate on a few of the more widely traded, and liquid pairs such as the EUR/USD, GBP/JPY, or USD/CHF, which are all currencies of major powers.I do binary options trading. For my trading I like EUR/USD and GBP/USD. Chart is also very important for options trading that's I trade on lxmarkets.com, cause it's chart is very good with no fake candles.

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