Currency pairs, making the right choice

One fundamental question most people ask themselves about the FOREX market is what currencies do i trade?

There are many currencies in the world but not all of them can be traded. Currencies that are mostly traded include the USD (us dollar), JPY (Japanese Yen), GBP (British Pound), AUD (Australian Dollar), CAD (Canadian Dollar), EUR (Euro), CHF (Swiss Franc) and the NZD (New zealand dollar). The listed currencies are what a major part of the FOREX market work with. There are 27 currency pairs which can be derived but only 18 are conventionally quoted by forex market makers as a result of their liquidity These pairs are:

USD/CAD, EUR/JPY, EUR/USD, EUR/CHF, USD/CHF, EUR/GBP, GBP/USD, AUD/CAD, NZD/USD, GBP/CHF, AUD/USD, GBP/JPY, USD/JPY, CHF/JPY, EUR/CAD, AUD/JPY, EUR/AUD, AUD/NZD.

To understand the trading process we are going to move use of a little illustration:

Suppose you decide to go into the FOREX market and you successfully invest $1000 of your own money knowing fully well that with current margin accounts (as mentioned earlier), you can control a lot more than your investment. Now you've gone over every trading platform and broker, selected the most suitable, gone over the trends of the market and now you want to move on to the next thing which is trading. This is where the analysis comes into play whether you choose the Fundamental or Technical approach.

After analyzing current market trends and exchange rates you select a currency pair which you are satisfied with. Now the analysis process begins: you go ahead with a trading system you are certain works (make sure you take into consideration the concerns of such a system) and implement it ( make a prediction whether a currency will drop or increase and select the time till trade termination).

One question people ask me is: isn't FOREX like gambling?

Well yes and no, see in gambling you go in either to win or loose everything but in the FX market you can only lose what you stake and nothing more. This is somewhat confusing at first but when you start trading you'll understand it better. Until next time, keep trading.