This article looks at the currencies that you can use on the foreign exchange.
The foreign exchange which is also known as the forex market is the world’s largest trading market. This market offers a turnover of around $5 trillion each day. This is a much higher turnover than the stock market. When you look at trading on this market you will have to trade the currencies. It is important that you understand the impact of the different currencies on the foreign exchange and the trading that you can do. If you do not understand this then you are not going to be able to trade correctly and this will lead to losses on the market.
What Currencies are Found on the Foreign Exchange
Technically, you should be able to trade any currency on the foreign exchange. However, this is something that is not practical in real life. When you trade on the forex market you will be limited to certain currency pairs based on a number of different factors. These factors will include the experience you have on the market and the broker you are using.
The more experience you have with trading the more exotic the currencies that you trade can be. New traders are advised to trade with the common currencies because they offer the easiest trading experience.
The Most Common Currencies
There are a number of currencies that are traded more often than others. These commonly traded currencies often come from the largest economies in the world. Before you start trading you should know what these are and how common they actually are. You need to know this because it affects the liquidity of the trading that you do. The liquidity of the currency pair comes from the volume that is traded.
The most commonly used currency is the US dollar. This currency is part of over 80% of the trades that are completed on the forex market. This is also the currency that is most recommended for any new traders. The second most commonly traded currency is the Euro. This currency is in around 60% of all the trades that are completed on the market.
When you look at the other commonly traded currencies you will see that they are not in the same league as the US dollar and the Euro. The third most commonly traded currency is the British pound and this is used in around 15% of trades. The Japanese yen is the fourth and this is used in around 14% of all trades. The other commonly traded currencies all have a market share of under 10%. This means that they are in less than 10% of all the trades that are completed on the market.
Which Currency to Use
When you look at the currencies you have to consider which currency you should use. The currency pair that you trade with will depend on the type of trading that you are looking at and the strategy that you are going to use. There are certain currency pairs that are better for certain types of trading. There are also certain strategies that need you to use certain currency pairs.
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