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You don’t really have to make daily forex trade to take the vantage of forex exchange market. Every time you travel abroad and exchange your currency into a foreign currency, you are supposed to actively participate in forex trade. According to the survey conducted by Bank for International Settlements, the forex trading market is actually generating approximately $4 trillion dollars trade each day. Today, a forex trading market is like a big giant of finance and it is actually shadowing over all other trading markets of the world.
Despite of this huge and overwhelming size of forex trade, the concepts and strategies that are used in forex trading are absolutely simple. Let’s take a quick glance on some of the basic forex concepts that every forex trader need to realize.
Eight Major Currency Pairs
Forex trade is absolutely different from stock exchange trade. In stock exchange, you have unlimited number of stocks to pick from. However, in forex trading market, you only have to consider eight major currency pairs and then you have to evaluate that which currency pair will provide you the most appropriate overvalued or undervalued opportunities. Countries like United States, Japan, Euro zone (France, Germany, sprain and Italy), Switzerland, United Kingdom, Australia, New Zealand and Canada actually make up the bulk trade in currency trading market.
Yield and Return
When it comes to forex currency trading , the thing to remember is that your forex yield will help you to drive forex return. When you plan to trade currencies in forex trading market, you are supposed to purchase and trade two important underlying currencies. All type of foreign currencies is quoted in currency pairs. For instance if USD/AUS currency pair is quoted as 1.2500 then it means that it will take you at least 1.25 USD to purchase one Australian dollar.
In every type of currency exchange deal, you are actually purchasing one currency and selling another. In other words, you are actually using the return from the forex currency you traded to leverage the currency that you are purchasing.
Furthermore, it is also necessary for you to pick the right currency pair which has decent forex rates so that you can get maximum profit. You need to check out interest rates of the currency pairs as well because every type of currency pair in forex trading market comes with a specific interest rate which is usually adjusted by the Central bank of the specific country. You have the privilege to gain full interest on the currency which you have recently bought but you are compelled to pay the specific percentage of interest on the forex trading currency that you have recently sold out.