FOREX MARKET HOURS
Trading begins in Tokyo, Japan at 7:00 pm Sunday, New York time. Singapore and Hong Kong open at 9:00 pm EST, followed by Frankfurt at 2:00 am and London at 3:00 am. European markets are in full swing by 4:00 am, while Asia concludes their trading day. U.S. markets open in New York at 8:00 am Monday as Europe winds down. Australia takes over at 5:00 pm and Tokyo re-opens at 7:00 pm.
The quoted times are in Eastern Standard Time (New York).
Currency trading involves trading one currency against another. The currency exchange market has the largest trading volume in the world. Daily trading volumes exceed $1.5 trillion US dollars, which is much higher than the bond or stock markets. The New York Stock Exchange has a daily trading volume of about $50 billion.
Foreign currencies are commonly traded by individuals, corporations, and institutions for the purposes of hedging and speculation.
Currency exposures are common among corporate treasurers, private individuals, and investors. The FXTrade Platform is useful for hedging against such exposures. For instance, an investor who anticipates a decline in the EUR exchange rate after buying a European stock can sell the EUR against the USD as a hedge.
Speculative trading is well-suited for currency markets. The foreign exchange market has a daily volume exceeding 1.5 trillion USD, which is 50 times larger than all equity markets combined. This makes it the most efficient and liquid financial market in the world. Due to its efficiency, market price slippage is minimal or non-existent, even for large buy and sell orders. Traders can capitalize on intra-day volatility because of low spreads and short-term positions. Unlike equity trading, currency trading has no restrictions on profiting from market downturns, allowing traders to take advantage of both up and down trends and increase profit potential.
The currencies that are most frequently traded include USD, EUR, JPY, GBP, CHF, CAD, and AUD.
EUR/USD is the most frequently traded currency pair.
Forex Symbol Guide
The currency pair GBP/USD is commonly known as “Cable”.
The currency pair EUR/USD represents the exchange rate between the Euro and the US Dollar.
The currency pair USD/JPY is also known as “Dollar Yen.”
The currency pair USD/CHF is also known as the Dollar Swiss or Swissy.
The currency pair USD/CAD is also referred to as “Dollar Canada”.
The currency pair AUD/USD is commonly referred to as the “Aussie Dollar”.
The EUR/GBP currency pair is also known as the Euro Sterling.
The EUR/JPY is the currency pairing for the Euro and Japanese Yen, commonly referred to as “Euro Yen.”
The currency pair EUR/CHF is also known as Euro/Swiss Franc or simply “Euro Swiss”.
The currency pair GBP/CHF is also known as “Sterling Swiss”.
The GBP/JPY currency pair is also known as the “Sterling Yen.”
The currency pair CHF/JPY is commonly referred to as the “Swiss Yen”.
The currency pair NZD/USD represents the exchange rate between the New Zealand Dollar and the US Dollar, with the New Zealand Dollar often referred to as the “Kiwi.”
The currency pair USD/ZAR represents the exchange rate between the US Dollar and the South African Rand.
The GLD/USD refers to the spot price of gold.
The current spot price for silver in USD is displayed as SLV/USD.
Every currency has an ISO code abbreviation assigned to it. These codes are frequently used in currency trading to indicate which currencies make up a currency pair. USD/JPY, for instance, represents two currencies: the US Dollar and the Japanese Yen.
Foreign exchange trading involves trading one currency against another. For example, a trader who predicts that the dollar will increase in value compared to the Euro would sell EUR/USD. This means selling Euros and buying US dollars. To ensure consistency in quoting, there are established conventions to follow.
Can you explain the concept of being “long” or “short” a currency?
To buy a currency is to be long, while selling a currency is to be short.
When a trader goes long USD/JPY, they purchase US Dollars and sell Japanese Yen. Buying a currency means taking a long position in it. A trader takes a long position in a currency when they think it will increase in value.
When trading USD/JPY, selling US Dollars and buying Japanese Yen is going short. Shorting a currency means selling it. Traders go short when they predict a currency will decrease in value.
The process of trading currencies involves buying and selling them.
Forex trading involves the simultaneous buying of one currency and selling of another.
When buying a currency pair, the first currency is bought while an equivalent amount of the second currency is sold. The quote currency is sold short, meaning it does not need to be owned prior to selling. Traders buy a currency pair when they believe the base currency will increase in value compared to the quote currency or if the exchange rate will increase.
When “going short” on a currency pair, the trader sells the first currency and buys the second currency. This is done when the trader predicts that the first currency will decrease in value compared the second currency, or that the second currency will increase in value compared the first currency.
An open trade or position refers to a situation where a trader has either bought or sold a currency pair, but has not yet sold or bought back enough of that currency pair to close the trade. The trader’s potential profit or loss is dependent on the price fluctuations of that currency pair.
Forex is essential for international capital transactions. Profits from minor currency market movements can be huge and made in minutes. Some banks earn 60% of their profits by aggressively trading currency, compared to slim margins in other banking areas.
The currency market is growing rapidly, with trading volume increasing by 25% annually since the mid-1980s. Thanks to technology, what used to take days can now be accomplished in minutes. Major banks move millions of dollars between currencies every second through computers. The average investor can also easily trade currencies with the touch of a computer key.
International capital transactions rely on foreign exchange. Trading currency can result in huge profits in just minutes, compared to other areas of commercial banking. Some banks make up to 60% of their profits from aggressively trading currency options markets.
Foreign currency transactions occur when one country’s currency is exchanged for another. The price negotiated for the purchased currency is called the foreign exchange rate. Commercial banks in money market centers around the world handle the majority of these transactions.
Currency options is the world’s fastest growing industry due to a 25% yearly increase in trading volume since the mid-1980s. What once took days to accomplish in Europe or Asia can now be done in minutes. Technology has made this possible, allowing major banks to move millions of dollars between currencies every second through computers. And for the average investor, trading can be done with the touch of a phone.
Explaining the concept of a PIP in Forex trading.
The smallest increment in a currency pair is called a “pip”. In EUR/USD, a movement from.8951 to.8952 is considered one pip. Therefore, a pip is equal to.0001. In USD/JPY, a movement from 130.45 to 130.46 is considered one pip, making a pip equal to.01.
The process of determining the value of a pip is being calculated.
To calculate the worth of a movement in dollars, consider how much 10,000 Euros in EUR/USD is worth. For USD/JPY, the value of one pip per 10,000 Dollars is important to know. The size, or notional amount, is 10,000 units of the base currency. To calculate the pip value, use the following formula.
The calculation involves multiplying one pip, with the appropriate decimal placement and currency exchange rate, by the Notional Amount.
Taking USD/JPY as an illustration, this provides:
The calculation for the value of one pip is determined by multiplying the exchange rate by the trade size and conversion rate, resulting in a value of $0.77 or 77 cents per pip in this particular scenario.
As an illustration, let’s consider the currency pair EUR/USD.
The result of multiplying .0001 by EUR 10,000 and dividing by .8942 is EUR 1.1183.
To convert the pip value to USD, the EUR 1.1183 must be multiplied by the EUR/USD exchange rate of .8942, resulting in $1.00.
In currencies where the currency is quoted first, such as EUR/USD or GBP/USD, the pip value remains consistent at $1.00 per 10,000 currency units. This is why pip values in currency futures are fixed.
The following are the approximate pip values for major currencies, based on 10,000 units of the base currency.
For USD/JPY, a one pip change is valued at approximately $.77 for every $10,000, meaning a shift from 130.45 to 130.46.
The value of 1 pip for EUR/USD is $1.00, equivalent to a change from .8941 to .8942 for every 10,000 Euros.
The exchange rate for GBP/USD is 1 pip equals $1.00, with a value of $1.00 per 10,000 Pounds for a difference of 0.0001.
The value of one pip for USD/CHF is $.59, with a worth of $10,000 at 1.6855 to 1.6866.
The spread refers to the discrepancy between the currency selling price (Bid) and buying price (Ask). Typically, majors have a spread of 3 pips under normal market circumstances.
The spot Forex market trades 24/7, making it unique. Financial centers around the world exchange currencies every hour, with only brief pauses on the weekend. Traders can determine their own trading day and take advantage of global economic events because foreign exchange markets follow the sun.
The Foreign exchange rate market is where currency exchange transactions occur. This involves buying one currency while selling another. The most commonly traded currencies are called “Majors” and account for over 85% of daily transactions. The Majors include the US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar, and Australian Dollar. The Forex system was established in the 1970s when free currency exchange rates were introduced. Before this, exchange rates were more stable, especially during World War II.
Forex trading is the act of buying one currency and selling another. It is open to various entities, including small businesses, investment funds, and private individuals. You will need to open a forex broker account to trade this market. It is the world’s largest financial market, with a daily turnover of over $1 trillion dollars. It operates 24 hours a day, allowing for constant changes in currency exchange rates. Trading begins on Sunday in Sydney and Singapore, progressing through Tokyo, London, and ending in New York. This allows investors to respond to global events at any time.
The forex market is not like the stock market. It is an OTC market conducted on the “interbank” market. Trading happens between two counterparts, either over the phone, on electronic networks, and in various locations around the world. The major trading centres are Sydney, Tokyo, London, Frankfurt, and New York. The forex market is open 24 hours due to the distribution of trading centres worldwide.