The spot forex market is a platform where traders meet and conduct Forex trading transactions. These markets are naturally called over-the-counter. Thus, they are different from stocks trading because they do not have central exchanges. Conducting trades in over-the-counter markets merely involve the broker and the client. All in all forex spots are traded in 5 recognized centers. These are London, New York, Singapore, Hong Kong and Tokyo. For today's post, we intended to present the 5 widely traded currencies in spot markets with a hope that you find them useful in your trading sessions.
1.Swiss Franc
This currency is known to a lot of Forex trading enthusiasts
as a neutral currency because of its unique behaviour in terms of volatility.
Aside from the previous statement, one must note that Swiss Franc has earned
its fame among traders because of the confidentiality and vigorous performance
of Switzerland's banking system.
2. Pound Sterling
Also known as British Pound, this currency remained strong in
the FX market despite the controversial Brexit. Ranking 4th in the most traded
currencies in the market, Pound Sterling's value is usually based on the
overall strength of their economy as well as the political stability of its
government. Thus, it acts as a benchmark for currency in several countries
around the world.
3. American Dollar (USD)
History tells us that USD has always been the most traded
currency in the world. Back in the mid 1940s, the American or US dollar became
famous in FX trades because it was the
sole currency which was tradable to gold. At present, we can still notice the
gold and oil price rates are always quoted in dollars. Overall, USD is regarded
as a stable and reliable currency and it is a widely used mode of payment to
most of the countries around the world.
4. Japanese Yen
Japan's economy is
observed to be stable in terms of nominal GDP and purchasing power. Looking at
their currency, the Japanese Yen comes next after USD,Euro and Pound sterling
as the most valuable currency in the world. In line with this, traders can take
advantage of Yen's features to work as a carry trade. When we say carry trade,
traders would opt to borrow the said currency in their transaction because of
its low interest rate.
5. Euro
This is a currency used by the 19 countries who belong to the
European Union. Along with countries that belong to the Eurozone,several
European and African nations peg their currencies to Euro. This is done to
secure a particular currency's exchange rate. Consequently, Euro ranks 2nd
as the world's largest reserve currency.
In fact, Euro has the ability to add liquidity to any currency pair it trades
with.
Conclusion:
Each currency that is traded in the forex market has characteristics that make them remarkable. For starters, one must remember the need for familiarization and mastery of the prevailing elements that affect value and behaviour of currencies in the market. This in turn will be an initial step in one's successful trading experience.