Navigating the 24-Hour FX Market
28th November, 2023In this episode, Theo explores the world of FX trading, where the markets never sleep.
While many traditional markets adhere to business hours, the FX market operates around the clock, five days a week. With a staggering daily turnover of $7.5 trillion, the FX market is a force to be reckoned with.
Meet the Pips
In the FX market, price changes are measured in "pips," representing the last decimal place of a price quote. These movements may seem minuscule, but they add up. On an average day, a currency pair often shifts by less than 100 pips, which is less than 1%.
Understanding Currency Pairs
Currencies in the FX market don't trade in isolation; they interact with each other in pairs. To make informed trades, understanding the dynamics of these pairs is essential. Major currency pairs, which involve the US dollar, account for approximately 75% of FX volume. They are driven by financial expectations and interest rate changes.
Beyond the majors, minor currency pairs exclude the US dollar and include other actively traded currencies like the euro, yen, and pound. While less frequent, they can provide traders with diversified strategies.
Test your knowledge on the FX Market
Venturing into the Exotics
Exotic currency pairs involve emerging markets or smaller, cyclical developed markets. They are less liquid and have higher transaction costs, but they present unique options. Keep in mind that emerging market central banks are more likely to intervene in currency markets, adding an element of unpredictability.
Risk Management is Key
In the FX market, even small moves can have significant consequences. To succeed, you must have a robust risk management strategy. Leverage can boost profits, but it can also lead to rapid and substantial losses. When using leverage, tread carefully, and consider your risk tolerance.
The FX market is a dynamic and ever-changing environment, offering a multitude of options for traders. Capital.com is one platform where you can explore over a hundred different currency pairs and access risk management tools to navigate this fast-moving market.
Disclaimer: This presentation is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance.
