Forex Trading Pairs.
The forex market is the biggest market in the world and where it differs from stocks and shares is the fact that it is the trading of one currency against another. Stocks and shares are just the value of a company rising or falling dependent on how well they are doing or expected to do. The value of a currency must be valued against another for instance the pound becoming weaker against the dollar, hence currency is set out in trading pairs.
There are many different trading pairs which are classified into three groups; majors, minors and exotic the most traded pairs and the most volatile are the major currency pairs, six of which are all traded against the U..S. Dollar (USD) they are set out as follows; AUD/USD (Australian Dollar), EUR/USD (Euro), GBP/USD (British pound), USD/CAD (Canadian Dollar), USD/CHF (Swiss Franc) and the USD/JPY (Japanese Yen).
You would have noticed that in the previous paragraph the first three trading pairs have the U.S. Dollar as the second currency in the pair and the last three it is reversed and the U.S. Dollar is the first Currency in the Pair. This is a relevant formation for a trader trading from technical data on charts. A trader will have all six charts in view at the same time, reasons for this will become clear in a minute. The set up should consist of a block of six charts, two rows of three. The top three charts left to right will read; AUD/USD, EUR/USD and GBP/USD. The bottom three will read left to right USD/CAD, USD/CHF and USD/JPY.
When this chart set up has been established it is possible to see the market as a whole and as some of the trading pairs have direct influence on what another is doing it can give tell tale signs as to which each currency is about to do. One of the better examples of this is the EUR/USD and the USD/CHF. With the charts set out as outlined in the previous paragraph the USD/CHF should be directly below the EUR/USD and you can see that they are almost a butterfly image of each other. You may be about to take a trade on the EUR/USD but notice the USD/CHF is coming up to a psychological number if the USD/CHF stalls or hits resistance at the psychological number it is likely to stall the EUR/USD as well.
You will notice that certain trading pairs are not as volatile as the others and this may well effect the way in which you trade them individually. It is known that the GBP/USD is the most volatile currency and although this can cause it to be the most profitable it is known to have violent swings within its trends and should be traded with caution. For beginners it is best to stick to a more stable slower trading pair such as USD/JPY until some experience is gained.
Article Source: FxTradingStock.com
About the Author
Adam had been trading forex for years with little success. Adam originally had no experiance of the forex markets so he joined Colin Atkin's selected members club. Colin is a professional trader who shares his trading live, all you have do is watch & copy what he does and take the profits. Since Adam joined Colin he has had the cash to invest in other business opportunities.
by: Adam Woods
Total views: 75
Word Count: 522
Date: Tue, 13 Apr 2010
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