Traders gather on the spot forex trading market to deal in the foreign exchange market. Since there are no central exchanges, they are distinct from stock trading.
Transacting in OTC marketplaces entails nothing more than the broker and the customer. There are five well-known locations where forex is exchanged. These are in New York, London, Hong Kong, Singapore, and Tokyo.
Here are the 5 most commonly traded currencies on the forex spot market:
- Swiss Franc
Many Forex traders refer to this currency as a neutral currency due to its unusual volatility behavior. The Swiss Franc’s reputation among traders is largely due to the secrecy of the country’s financial system and the intensity with which it operates.
- Pound Sterling
Despite the uncertainty surrounding Brexit, the British pound, or GBP, remained a strong currency on the forex market. The value of the pound sterling, which is the 4th most traded currency on the market, is mostly determined by the general health of the British economy and the political stability of the British authorities. Thus, it serves as a standard for currencies in a number of different nations.
- American Dollar
The US dollar has historically been the world’s most traded currency. Because it was the only currency that could be traded for gold in the mid-1940s, the US dollar became well-known in foreign exchange exchanges. Gold and oil prices are still stated in dollars for the time being. Most nations accept USD as a form of payment, and it is considered a stable and dependable currency.
- Japanese Yen
The nominal GDP and buying power of the Japanese economy are both steady. With respect to its value as a currency, the Japanese Yen ranks fourth in the world, after the US dollar, the euro, and sterling. Accordingly, traders may use the Yen’s characteristics as a carry trade. Carry trade refers to the practice of merchants borrowing a currency in order to make a transaction in that currency.
The Euro is the official currency of the European Union’s member states. Several European and African countries, including those that are not members of the Eurozone, have pegged their currencies to the Euro. A currency’s exchange rate is safeguarded in this way. As a result, the Euro is the world’s second-largest reserve currency, after the US dollar. The Euro may, in fact, increase the liquidity of every currency pair with which it trades.
The forex trading market has a wide variety of currencies, many of which have unique characteristics. In the first place, keep in mind the need of familiarizing yourself with and mastering the prevalent market components that influence currency value and conduct. This is the first step to becoming a successful trader.