A briefing on the currency market
The currency market, or popularly known as International Currency Market is the global market where the traders from all corners of the world participate to buy, sell and transact in different types of currencies. These traders include major banks, corporations, central banks, investment management firms, hedge funds, retail forex brokers, investors, angel investors and many more. This market is an emerging and dynamic one and sees an influx of a number of new dealers on an average basis. The popular market under this category is Forex, which is one of the leading foreign currency exchange market and hence a good knowledge of forex waluty i.e. forex currencies is a must. This article details further on this and how one can know the value of the same in the existing market. These currencies are denoted on the platform in the form of two parts of different currencies, like currency 1/ currency 2.
What is Forex Currency all about?
Forex currency or forex waluty is the standard format of dealing in the forums of the Forex market. It is depicted in terms of two different currencies like EUR/USD or USD/INR to name a few. The first type is the base currency while the second in the pair is the quoted currency. For example, in forex waluty of EUR/USD, EUR is the base currency and USD is the quoted currency. The prices of the currency pairs are mentioned a hence on the basis of that one can determine the current value of the Forex currency.
The valuation of this Forex currency keeps on changing daily as per the values of the two currencies in the pair. If one day one observes a value of 1.159 next to EUR/USD type of Forex money, then it infers that one has to pay 1.159 USD for one Euro. The values of these currencies are updated regularly on the forex platform and this has all been created to majorly facilitate the trading process between two different countries and promote the concept of global currency. The main forex waluty pairs are decided from the currency pairs of those countries that have a huge economic development and have a stable currency valuation of their nation in the international market i.e. in other terms they are the most liquid form available as per the market standards.
The primary currencies of Forex
Transaction over the Forex market is known primarily for its smoothness and degree of liquidity. Due to this liquidity of the Forex currency, one can easily enter inside of the market at any point of time and transact easily via any of the pairs. This is also one of the reasons for the choice of high liquidity currencies as the primary currency since they aid in a proper and smooth transaction for the trader. The following are some of the most popular forex waluty pairs of the Forex platform in today’s market times: –
- EUR/USD- Euro/US Dollar
- GBP/USD- Pound Sterling/US Dollar
- USD / CAD – Canadian dollar / US dollar
- USD / JPY – Japanese Yen / US Dollar
- USD / CHF – Swiss franc / US dollar
- AUD / USD – Australian dollar / US dollar
- NZD / USD – New Zealand dollar / US dollar
These are the currencies that have higher liquidity in the market in recent times and hence have been featured as the primary currencies over such a forum.
The concept of raw material currencies
Forex platform also supports a different type of currency called as raw material currency, which is used only for the transaction to purchase the raw materials. These are related to those economies that have a higher share of export from the raw materials trade. Some of the currencies of this category include the Australian Dollar (AUD), Canadian Dollar (CAD) and New Zealand Dollar (NZD). The strength of the latter is known primarily for its share to the market of crude oil.
How important is the concept of liquidity?
The concept of liquidity is of utmost importance in the Forex platform particularly, due to the ease of transaction that it creates. In such a platform of the international exchange system, this property aids in carrying out the bulks of the volume of transactions at utter ease. Since this gives a huge opportunity to the newbie players in the field, hence they prefer to begin their early stages of transactions with the main forex waluty pairs. This also aids them in earning lower commission costs from the transactions.
The popularity of a currency over the platform varies widely with the market conditions and is subject to changes on regular basis. For example, in the current times, Euro has greater popularity than US Dollars and the latter has more than Japanese Yen. This is because of the better marketing conditions of the European Market. Hence a regular track over the currency pairs need to be maintained so as to know and keep a knowledge of the marketing conditions easily.
How can one select the suitable currencies for the transaction?
This is one of the most confusing questions that might put even the experienced ones in utter confusion. Hence the following are some of the parameters that can aid in this: –
- Those currency pairs should be selected about which one has the best idea and hence he or she can predict the required conditions and fluctuations accordingly.
- Those currency pairs must be selected that have higher liquidity as it not only eases up the transactions but also provides lower commissions and other costs that can be incurred by the trader.
- Those currency pairs must be selected that have a stable valuation per day and do not vary much with the changing times.
On a concluding note, getting involved in currency exchange trade is quite a Herculean task as it requires utmost efforts and a huge knowledge base on the existing market conditions. But not to worry, as the newbies can learn the same by beginning their transactions with the demo accounts and then later shifting to the professional ones as they ace up in the field.