Live Markets and Data

About Live Markets and Data

Currencies are traded on the Foreign Exchange market. The Forex market is decentralized and is traded all over the world. The forex market is considered the biggest market globally by the amount of trading activity. Forex is the most liquid financial vehicle in the world. The exchange rates are continuously fluctuating due to ever-changing forces of supply and demand for the currencies.

Forex traders buy a currency if they think the exchange rate will rise and sell if they think the reverse is going to happen. The Forex market remains open during the working week 24 hours a day around the world.

Before the Internet revolution, only big players such as multinational banks, hedge funds and extremely wealthy individuals could trade forex easily. But today,anyone can buy, sell and speculate on assets online via their forex accounts on their PCs or laptops and from the convenience of their homes. 

What are Assets in Forex Trading ?

An asset is an economic resource that can be owned or managed for the return of a profit or potential gain. 

In financial trading, the term asset refers to what is being traded on markets such as currencies, commodities, securities, bonds and cryptocurrency.

Which Currency Pairs Should I Trade ?

Choosing the best currency pairs to exchange depends on your experience as a forex trader. If you are a beginner, it’s advisable to stick to the major and minor pairs. You’ll find trades more easily and get lower spreads. It’s more difficult dealing with exotic pairs as they’re much less liquid with larger spreads.

That said, you can make money with exotic pairs as long as you know what you’re doing. Such pairs may be riskier, and they may cost more to trade.

Currency

You pair two currencies at a go when trading Forex. If you want to sell the British Pound, for example, you need to be clear what you’re selling for. 

Let’s presume you’re selling dollars, and you’re going to get euros in exchange. In that case, you are trading a USD/EUR currency pair.

You focus a lot on currency pairs when trading Forex, whether you are trading GBP/USD (British Pound/US Dollar), EUR/USD (Euro/US Dollar), or NZD/SGD (New Zealand Dollar/Singapore Dollar) etc, your trading conversations at any stage will be dominated by currency pairs.

There are three kinds of currency pairs: major, minor and exotic :

Major currency pairs are the most commonly traded currencies in the world. Since they have huge liquidity, you’re almost always able to buy and sell them in large volumes. In fact, with these pairs, if you are looking for the lowest spreads or brokerage costs, using these pairs is your best bet.

The table below shows the major currency pairs: 

USD/EUR

US Dollar/Euro

GBP/USD

British Pound/US Dollar

CAD/USD

Canadian Dollar/US Dollar

JPY/USD

Japanese Yen/US dollar

CHF/USD

Swiss Franc/US Dollar

USD/AUD

US Dollar/Australian Dollar

USD/NZD

US Dollar/New Zealand Dollar

Note : that every major currency pair has the US dollar on one side. For good reason, the dollar is the world’s leading reserve currency and accounts for around 88% of currency transactions.

If a currency pair does not contain the US dollar, it is considered a small currency pair or a cross-currency pair.

The table below shows the most traded minor currency pairs: 

EUR/AUD 

Euro/Australian Dollar

GBP/EUR

British Pound/Euro

CHF/JPY 

Swiss Franc/Japanese Yen

JPY/NZD

Japanese Yen/New Zealand Dollar

GBP/JPY 

British Pound/Japanese Yen

CAD/GBP

Canadian Dollar/British Pound

The most commonly traded minor pairs consist of Euros, Yen or British Pounds.

Exotic currency pairs comprise the main currencies of a developing economies (such as Brazil or South Africa). You’re not going to find rare pairs as much as you find major or minor pairs, which means that spreads will be larger when exchanging them.

Exotic currency pairs include: 

SGD/NZD

Singapore Dollar/New Zealand Dollar

HKD/USD

Hong Kong Dollar/US Dollar

TRY/EUR

Turkish Lira/Euro

JPY/NOK

Japanese Yen/Norwegian Krone

MXN/AUD

Mexican Peso/Australian Dollar/

GBP/ZAR

British Pound/South African Rand

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Commodities

A commodity is a good used in a business or on a market. Every commodity, when traded on an exchange, must meet its requirements and grades. They may be slightly different, but essentially they are the same for all producers. 

There are two different kinds of commodities, soft and hard :

Soft Commodities

This applies to goods that are produced as opposed to mined. For example, agricultural products such as sugar, maize, wheat, coffee and more. Generated by farmers, these commodities are highly susceptible to climate and weather changes and have seasonal cyclical pricing patterns.

Hard Commodities

This applies to mined products, such as oil, gold, diamond, copper, other precious materials, and energy products.

What Influences Commodities Prices ?

Various factors can influence commodity prices and contribute significantly to their price fluctuations.

  • Supply and Demand – If supply and demand are balanced out, forex exchange rates will stay the same. If the market forecast suggests low supply due to unfavourable weather or cuts in output, prices will likely rise, and vice versa; higher supply typically means lower prices.

     

  • Supply and Inventory – Production of these commodity prices can be influenced by the following: weather, crop diseases, staff development problems, political and economic conditions that require additional charges such as taxes, exchange regulations, government subsidies, etc.

     

  • Currency Trading Power – Connections between some of the world’s most traded commodities and Forex pairs are common. For example, the Canadian Dollar (CAD) is related to oil trading rates since Canada is a major oil exporter. 

    You should be aware of these common connections as they are crucial in making the right decisions for effective trading in commodities. It should be remembered that most commodities are priced in US dollars, and it would, therefore, be prudent to track the dollar index in order to better forecast market dynamics. 
  • Inflation – As inflation happens, the price of a commodity typically increases accordingly.

Indices

Indices traders focus on market fluctuations in stock Indices such as the FTSE 100, Dow Jones and DAX. These well-known Indices are basically individual share baskets, which are mostly listed by independent entities such as major banks or specialist companies such as the FTSE Group, Standard & Poor’s, and Deutsche Börse. Some of the world’s largest Indices markets have long, unique histories. Indices price fluctuations and volatility are affected by factors such as political events, major factors affecting companies in a specific industry, economic data such as job statistics and significant shifts in currency markets. It is worth bearing in mind that significant changes in the fortunes of a single large business that is part of a larger index can have a disproportionate effect on its results. Global Indices markets are defined by ‘benchmark Indices,’ which are basically stock Indices that impact heavily on the economy. They are widely regarded as accurate indicators of the economic health of a country or region. The most commonly traded live indices are: 
  • FTSE 100 – This comprises the UK’s largest 100 companies by market value.
  • Dow Jones – Commonly known as the ‘Wall Street,’ it is made of a group of 30 of the biggest public-owned companies in the US.
  • DAX – Referred to as ‘Germany 30,’ which is made up of 30 big German firms.  
  • NASDAQ 100 –Weighted on capitalisation, it is usually referred to as the ‘‘US Tech 100,’ and comprises over 100 tech companies in the US.
  • Nikkei 225 – Weighted on capitalisation and comprising 225 of Japan’s largest companies. 
  • CAC 40 – Simply referred to as ‘the France 40.’ This comprises 40 of France’s biggest companies by capitalization.

Cryptocurrencies

Cryptocurrencies, sometimes referred to as “digital currencies,” are not the same as currencies like the US dollar (USD) or the Japanese yen (JPY).

Although currencies in the Forex market are backed by a centralized government, there are none for cryptocurrencies. They are hosted online and backed up by a peer-to-peer authentication mechanism that prevents you from using cryptocurrencies (such as Bitcoin) more than once.

The network also produces cryptocurrencies in exchange for people working to protect the network and test inputs in return for digital currency. Such people are called miners.

Previously, the global cryptocurrency industry has exceeded a market value of more than $700 billion. Some analysts expect that the number will only increase.

Cryptocurrency trading is similar to forex trading, requiring the exchanging of currency for another currency. Nonetheless, different factors affect the cryptocurrency market and the forex market.

Volatility

The crypto market has traditionally been volatile and unpredictable. For extreme foreign currency pairs in the Forex, the volatility is about 1% and for less developed currencies, it is 5%. 

By comparison, Bitcoin has a variance of between 5% and 15%. That’s why cryptocurrencies will appeal to traders with a high-risk tolerance.

Volatility occurs in both the Forex and the cryptocurrency markets. But the higher the risk, the higher the reward. While cryptocurrencies continue to fluctuate dramatically, both the cryptocurrency market and the Forex market can be subject to huge price fluctuations over a short period of time.

Trading either cryptocurrencies or foreign currency requires a high degree of commitment. It needs good financial planning, sound risk management, perseverance and a willingness to learn continuously. But there is no question that trading in any of these common markets can lead to remarkable opportunities for an informed investor.

Summary

One of the great benefits of Forex trading currencies is that the market is open 24 hours a day, five days a week (from Sunday, 5 p.m. to Friday, 4 p.m. ET). Economic data is generally the most important factor for short-term moves because prices change as a result of the news, and in anticipation of news/economic releases. 

The currency market responds not only to economic figures in the US and UK, but also to global updates. To trade successfully in Forex using news, you need to study/review economic figures, taking into consideration which data is most significant to your trading and when it was published, plus how it should influence your trading decisions. Alternatively you can focus more on technical analysis.