The Forex market is the most popular in the world which is not surprising when you consider that money is something you can get almost anything for. Currently, the dollar followed by the euro and the yen are the most popular currencies in which to trade directly or through Forex brokers.
Why is the US dollar so popular?
- The US economy is the largest in the world.
- America dominates not only economically, but also politically and militarily.
- The US dollar is the currency that is used for many transactions, for example, oil can only be bought with dollars.
Speculate on the Forex market
It is nice to know that many people speculate / gamble on the price of the currency pairs. When you apply a well-functioning strategy, it is possible to dominate these daredevils by making a profit from the blunders of this more than ninety percent of the market!
Here, the play of liquidity or the volume of a big role. The volume indicates how many people trade certain currencies in a day and how big the differences are between them. For a professional, these values are very important as they can determine the speed at which the market can change at any given time.
Liquidity or the amount of trade often differs from time to time and is linked to the opening of different international markets.
Currency pairs and their mutual relationships
When you actually trade in currencies, mutual relationships are very important. In order to trade in something, mutual relationships are required, and these are expressed by the so-called currency pairs.
The EUR/USD is among the most traded currency pairs where you buy a certain number of dollars for one euro. The demand for both currencies is constantly changing so that the exchange rates/ratios are always different. This is the particular value of the euro against the dollar, and when the euro rises in EUR / USD, the USD automatically falls in value against the euro.
Exotic currency pairs
Many brokers also allow you to trade in exotic pairs. Exotic pairs are relationships in which for a well-known currency such as the dollar you receive a lesser-known currency from an often emerging country, such as Brazil or Laos.
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The size of the Forex market and its liquidity
The special thing about the Forex market compared to other financial markets such as the New York Exchange is that the Forex market does not have a central location. It is a market that is always active and runs through a large network of banks where demand is determined by the total demand for certain currency pairs.