Currencies are almost always traded in pairs on the forex market, using one to buy another. Whether you realize it or not, you have almost certainly traded currency pairs before without being a trader, as this is done when you change spending money on holiday.
In this article, we’ll be sharing tips that’ll help you trade currency pairs and get up to speed with forex. Online trading in UK markets is increasingly popular and so knowing how to make the most out of the recent market volatility is key if you want to get good returns,
What is currency pair trading?
If you want to begin trading forex, having a fundamental understanding of what currency pair trading is will be essential. The main thing you need to know is that you will be buying one currency in exchange for another, looking for opportunities to make money in the process. This can be done when one currency increases in value compared to another, allowing you to keep the difference.
It’s super simple to begin trading currency pairs, too, as all you really need is a good internet connection and some money to place your first trades. Unlike other forms of investment, you don’t need to be super rich to get started in forex currency trading, as you can begin with as much or little as you want. In reality, it’s actually a better idea to start small and work your way up.
What can you trade with?
To get started in currency pair trading, you first need to figure out which currency pairs you want to trade with. As you’re just a beginner, there isn’t really a wrong answer and we’d recommend that you first start with a demo account so you can find pairings and a strategy that works for you. Each trader has their own preferences, so it’ll take time to find yours.
There are some trading pairs that are more popular than others, and while this doesn’t necessarily mean that they’re the best, it does mean that you’ll probably end up trading them sooner or later. These more popular currency pairs are EUR/USD (euro against US dollar), GBP/USD (Great British pound against US dollar), and USD/JPY (US dollar against Japanese yen).
Once you’ve done this and found a pairing that’s to your liking, you just need to place the trade. Whether you’ve done this for real or using a demo account doesn’t matter. All you need to do is watch the charts and decide when you want to pull the trigger.
What drives currency pairs?
While we all know that currency is a popular trading medium, it’s essential to understand the reasons why people trade and what causes the prices to change so dramatically. We commonly see currency prices vary due to real-world events that can impact the financial markets, such as inflation rate changes, economic forecasts, regulation changes, and much more.
While these events can have devastating impacts in the real world, they can be hugely beneficial moments for currency traders as it often means that there will be a period of market volatility. To those who are new to forex trading, this volatility can be scary, but after a short while, you’ll begin to see patterns in the chaos. You will be able to identify opportunities for you to capitalize.
This is why it’s so important to keep up to date with the latest news events and subscribe to as many financial and real-world newsletters as possible. Even if a story might first appear minor, it could have huge implications on the world of forex trading.
What are the benefits of trading currency pairs?
There are many benefits to forex currency trading but here we’ve listed just a few that should provide enough reason for you to get involved and begin your forex trading journey.
The market is liquid
The forex market is highly liquid and while this might sound like trading jargon, it means that there is almost always somebody looking to buy your currencies from you. The whole market is in constant flux and never seems to truly slow down for anything.
You can trade after hours
One of the most significant benefits of currency pair trading is that the markets are open 24 hours a day, 5 days a week. This makes it ideal for those who want to trade around their full-time job or other commitments, allowing for weekend rest time.
You can use leverage
Another considerable benefit of forex trading is that you can use leverage, meaning that you can control a large amount of money with only a small amount of investment. This can lead to higher profits but also carries more risk, so it’s not recommended for beginners.
