One advantage of forex trading, among other things, is that this form of speculation with certain background knowledge is also suitable for beginners. Nevertheless, one should first act cautiously and inform themselves in detail about the customs and market conditions. This also involves beginners in forex trading dealing with the currency pairs they want to speculate on. In this respect, it is important to know that there is a division into different groups in the market.
We would, therefore, like to inform you in the following, which currencies or currency pairs are particularly suitable for beginners and which foreign exchange couples are more likely to be the pros who should act.
- Forex Basics
- Currency pairs
- Forex Couples for Beginners
- Exotic currency Pairs
Foreign Exchange Market Operates On The Basis Of Currency Pairs
If you have not yet dealt with forex trading, you may not know how the trade works and what the forex market is based on. In fact, it is usually the case that forex trading is about trading in individual currencies, which is not entirely correct in the form. Each trade you make via the trading platform of the forex broker automatically contains two currencies.
Thus, they never act only a single currency, but a currency pair, which therefore consists of two currencies. The currency pair has the task of representing the value ratio of the two currencies involved. So if you are convinced that the dollar will rise in the near future, you will need to decide in the second step which currency you would like it to be.
It may well happen that the dollar increases its value compared to the euro, but it suffers a loss of value compared to the pound sterling. Precisely for this reason, it is important that you always keep an eye on both currencies involved in the currency pair when trading in foreign exchange pairs.
In Which Groups Are The Currency Pairs Divided?
There are now over 50 currencies on the market, which can be traded freely and thus without regulations and restrictions. This, in turn, results in a total of over 200 forex pairs that you can trade. Therefore, it makes sense to divide these currency pairs into different groups.
Major Currencies And Exotic Forex Couples
Although there is no uniform regulation in this regard, it has been shown in practice that the vast majority of all tradable currencies or currency pairs can be assigned to one of the following three groups:
- Standard Currencies
- Currencies still well tradable
- Exotic Currencies
The best known is certainly the group of standard currencies, sometimes referred to as world currencies. The major impact of these currencies and currency pairs on foreign exchange trading is evident solely in the fact that more than 85 percent of all transactions made on the foreign exchange market is based on the five standard currencies listed below:
- US Dollar
- British pound
- Swiss francs
- Japanese Yen
The second group mainly includes those currencies which are, on the one hand, still tradable, but which do not generate the importance and trade turnover, as is the case with standard currencies.
For example, the following currencies can be categorized into this group:
- Swedish krona
- Norwegian crowns
- Danish krona
- Russian Ruble
- Indian rupee
- Yuan (Chinese currency)
In these currencies and, of course, in the currency pairs, where a component consists of the standard currencies and the other component from the currencies of the group of well tradable currencies, you can assume that a given trade order Can be executed within a short period of time due to liquidity present on the market. However, this does not apply to the so-called exotic currencies, which represent the third group of currencies traded on the market. The term exotic is therefore used because these currencies are not necessarily unknown, but have very little significance in the foreign exchange market and have only a small share of the overall market from the volume. Why these more exotic currencies are absolutely inappropriate for beginners, we will explain in one of the following sections.
The group of exotic currencies includes, in particular, foreign exchange, which is used in countries that have little significance on the foreign exchange market.
These are, among other things, numerous currencies from African or South American countries, for example:
- Argentine peso
- Brazilian Real
- Algerian dinar
- Dalasi, Gambia
- Kwacha (Malawi)
Especially suitable for beginners: The standard currencies. Now, you know which groups the best.