Risk Disclosure

"Forex trading can involve the risk of loss beyond your initial deposit. It is not suitable for all investors and you should make sure you understand the risks involved; seeking independent advice if necessary"

Binary Options

Saturday, November 10, 2007

How are currencies Traded

A currency trade is the simultaneous buying of one currency and the selling of another. The currency combination used in the trade is called a pair (for example, the Euro/US Dollar, or the GB Pound/Japanese Yen.). The most commonly traded currencies are the so-called “majors” – EURUSD , USDJPY , USDCHF and GBPUSD . Other popular currencies include USDCAD, AUDUSD, USDNZD.

Cross currencies are currency pairs that are not traded against the USD. Some of the more popular trading pairs include the EURJPY, EURGBP, EURCHF, GBPJPY, GBPCHF and EURAUD.

Currencies are traded through brokers, dealers, trading platforms or market makers. The advent of the world wide web has made currency trading available to millions of people round the world, from small time speculators to to huge investment houses.

Because of the high volumes traded liquidity is seldom a problem, enabling traders to enter and exit trades with relative ease under normal trading conditions. The market is called the spot market because trades are settled almost immediately.

Due to the high degree of leverage available from most brokers in the Forex market, traders are able to make or lose large sums relative to the small amount of capital invested. This high leverage can work for or against you. Traders and prospective traders should fully familiarise themselves with the risk of high leverage before investing or attempting to trade.

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