This Article is About
day trading
currency pairs
forex brokers
base currency
trading forex
currency market
stock market
A Primer On Forex Day Trading Currencies
Join 1000's of Authors at StreetArticles Today!

A Primer on Forex Day Trading Currencies

Trading Forex is a relatively simple process in which one currency is exchanged for another. Huh? This may seem confusing at first, for it differs from the stock market (where you simply buy a share with the belief that it’s either going to go up or down). In the currency market, a specific currency may go up or down relative to another currency. For example, the Dollar may strengthen (rise or go up in value) against the Euro, but, at the same time, weaken (fall in value) against the British Pound. As we discussed above, economic news from a specific country can influence its currency. Therefore, one should never say that “The dollar strengthened,” but rather that “The dollar strengthened against the Euro.” Remember, a currency does not simply go up or down but does so relative to another currency. So, when you choose to trade a currency, you will trade a pair. These two currencies are known as the “currency pair”.

Currency Pairs in Forex

As mentioned above, currencies in forex trading are traded in pairs and are quoted in a shortened form such as EUR/ USD by all forex brokers. The first displayed currency is referred to as the base currency (in this example it is the Euro), and the second quoted currency is referred to as the “quote” currency (in this example it is the US Dollar).

You don’t, as a new trader, need to worry about understanding the meaning of “base” and “quote”. There is a much easier way to view currency pairs: you simply determine which currency you think is going to go up or down (this currency precedes the “/”) and against which currency you think it will move (this currency will follow the “/”). Remember, again, what we said earlier: a currency always goes up or down relative to another currency.

If you predict that the Euro will go up against the Dollar, you would buy EUR/USD; if, however, you predict that the Euro will go down against the Dollar, you would sell EUR/USD. In trading terminology used by most forex brokers, buying something is referred to as going “long”. If a trader is trading long in the EUR/USD, it means the trader is buying the Euro (base currency) and selling the US dollar (counter currency). The counter currency is the value of the price movement and the currency in which your profit or loss will be quoted in. For example, if you bought EUR/USD, your profits or losses would be displayed in US Dollars (not in Euros).

So, which currency pairs can you trade?

The most popular pairs -- those with the highest trading volume (85%) -- are commonly referred to as the “majors”. It is advisable to stay within these pairs unless your particular strategy demands otherwise. “Major” pairs are cheaper to trade and typically less volatile. All Forex brokers should offer these sets of “major” pairs.

Some of the major pairs actually tend to move in the same direction most of the time: these are the EUR/USD with the GBP/USD, the USD/JPY, the USD/CHF, and, finally, the NZD/USD and the AUD/USD. Other pairs spend most of their time trading in completely opposite directions: these are the EUR/USD, USD/CHF, GBP/USD, USD/JPY, AUD/USD and USD/CAD. Traders can trade more than one of these pairs knowing that they are most likely to either move in the same or opposite direction.

Some traders prefer to trade currencies other than the US Dollar, and the “cross currencies or crosses” allow them to do so. However, the “cross” markets are generally less liquid than the “majors”. The three most active non- USD currencies are EUR, JPY and GBP. There are other currency pairs you could choose to trade, sometimes referred to as “exotic” currencies which are available with forex brokers such as ThinkForex

If you feel that the South African Rand is going to appreciate against the dollar, you could buy ZAR/USD. However, these “exotic” currencies are not only very volatile but tend to cost more to trade.

Trading Zones and Market Hours

The major trading centres are located in London, New York, and Tokyo, and it is in these cities, during office hours, where the majority of the market activity occurs. The 24 hour Forex market follows the sunlight around the globe – each country’s trading centre is open from 8:00 a.m. – 4:00 p.m. (local time).

For example, when the market closes in the U.S., it is opening elsewhere. This is convenient for you as it means you can continue to trade. If you happen to live in Tokyo, the following time frames would apply to you: Europe would open when it is 3:00 p.m.; London when it is 4:00 p.m.; and New York when it is 9:00 p.m.

When working out the timeframe that suits your location best, make sure it is a session with heavy volume. These sessions usually occur when multiple countries’ markets are trading at the same time, for this allows the greatest price fluctuations which thereby present the best opportunity for you to make a good return on your investment.

The best part about currency trading is that besides forex, you can also trade with binary options, which is a lot more simpler. All you need to do is choose the direction of the currency pair and if your prediction is right, your tend to gain up to 89% of your invested capital. Its simple quick and much less complicated and thus makes it ideal to try it out if you are a beginner to forex trading.

Street Talk

No comments present
You May Also Like
Simple Day Trading Techniques for Beginners
Beginners learning to make money in the stock market often could use a few simple day trading techniques to get started. Here are a few ways beginners can make a few moves in the market using uncomplicated strategies. People trying these simple day trading techniques should try to keep in…
By: Steve Wise in  Investing  >  Day Trading   Jan 23, 2012  
  Likes: 0

Day Trading for a Living
Many ask if day trading for a living is still possible given all the changes in the markets since the wild days of the first decade of the new millenium. Although the rules have changed a bit (and are still changing), the concept of day trading for a living is…
By: Steve Wise in  Investing  >  Day Trading   Oct 13, 2011  
  Likes: 1

Day Trading: Really?
If your new to the Day trading business, let me be the first to welcome you to this complex and intricate world. Because this is a 101 course(beginners) article, I will not go into any in depth detail about certain subjects. This article is strictly for introduction purposes only. Let…
By: PrinceStringer  in  Investing  >  Day Trading   May 16, 2012  
  Likes: 1

Way's to Profit on Penny Stock's
There is not that many investments out there that can give a quick return like a penny stocks can. They have a huge potential for great money very quickly, but they are also very risky and it requires a lot of research to find the good ones to invested in.…
By: Mike Keedy in  Investing  >  Day Trading   Mar 30, 2012  
  Likes: 0

Trade Forex With Support And Resistance Levels
Technical analysis is the use of technical indicators when trading forex using the forex charts. Of the various technical indicators that are available, support and resistance levels are one of the most commonly used indicators. It is in fact one of the most popular technical indicators used by forex traders…
By:  in  Finance  >  Currency Trading   Mar 29, 2012  
  Likes: 0

The Forex Revolution - What is Revobot-1?
Revobot-1 is our flagship EA and the first EA to be introduced to The Forex Revolution. We have started with this robot as it is a solid performer and trades Low Frequency High-Probability Setups.
By: Anthony Horne in  Investing  >  Day Trading   Jan 25, 2011  
  Likes: 0

Is Forex Exchange Trading for you?
Foreign exchange or even forex currency trading is the way through which people can invest their money. This system works due to day-to-day fluctuations within forex exchange currencies. Whenever, the forex trading system changes, it brings change in the forex rates and Pips. If the value of the dollar suddenly…
By: wirefax in  Finance  >  Currency Trading   Oct 02, 2011  
  Likes: 0

Forex Automatic Trading - Why Forex Robot Traders Beat Human Traders Every Time!
The debate about Forex automatic trading versus Forex manual trading has been raging on for many years, and for a long time, the human Forex trader was king. There has been some major shifts in the balance of power in recent years, mainly because of how accessible it is for…
By: Thad B. in  Finance  >  Currency Trading   Feb 24, 2011  
  Likes: 0

How to Make Your First Forex Trade
Every industry has its own challenges and this is why it takes sometime before one gains the necessary skills and knowledge to make it in a particular industry. Forex trade is a market that has been growing tremendously and has proved to be a reliable source of income. As a…
By: lee8 in  Investing  >  Stocks   Dec 08, 2015  
  Likes: 2

Forex Currency Trading Station
The Forex currency trading station is a place where everyone can buy or sell a currency. This is also called the Forex trading platform. On this platform all the Forex currency trading financial companies, brokers, banks will create their own trading hubs. All these hubs use trading algorithm soft wares…
By: Andrei Ionescu in  Investing  >  Day Trading   Jul 02, 2012  
  Likes: 2

Benefits Of Trading With the Right Forex Broker
Selecting the right Forex broker can indicate the significant difference between methods and losing profits. It is that easy. When choosing an online Fx broker, there are generally 5 "must have" qualities to take into consideration -- a good financial firm, low develops, tools together with research, leveraging options, and…
By:  in  Investing  >  Day Trading   Dec 06, 2011  
  Likes: 1

Concept Of Forex Quotes
Forex quotes is term that can be heard frequently in everyday life, and in a Forex trader’s work even less so. It’s not possible to sell and buy something without Forex quotes, because the income of the trader depends on the Forex prices at the given moment. So, when trading…
By: draftnik in  Finance  >  Currency Trading   Feb 17, 2012  
  Likes: 0

How to Manage Your Risk In Trading Forex
How to manage your risk Risk Management Once you have the facts it is decision time. You can choose to do nothing or seek to reduce the exposures or to hedge them in whole or in part. The unforgivable sins are to fail to consider the risks or fail to…
By: tuan in  Finance  >  Currency Trading   Nov 07, 2012  
  Likes: 2

Elss : Encompassing Investments With Tax Saving
The financial year 2015-16 has ended and with that, the tax paying deadline is also over. It is often observed that the clients pursue the tax saving plans by the end of the year, i.e., in February or March. It may have helped you till now, but it is a…
By: Dishika Baheti in  Investing  >  Day Trading   May 18, 2016  
  Likes: 0

How to Choose A Broker for Day Trading
Day trading is the practice of holding positions in a financial market for no longer than a single day, and often for much shorter periods of time. Day traders always exit any trade before the end of the trading day (often referred to as the 'regular cash session'), and aim…
By: Alexander Pearson in  Investing  >  Day Trading   Apr 27, 2016  
  Likes: 0

Article Views: 5505    Report this Article