The World's Biggest Markets

The Tradefair Trader / Editor / 18 July 2008 / Leave a comment

For many spread betting beginners the only involvement they have with foreign currencies is when they get money changed for overseas holidays. You can however trade on these

Buzzwords of the week; tip 2

For many beginners the only involvement they have with foreign currencies is when they get money changed for overseas holidays. You can however trade on these Foreign Exchange markets (usually abbreviated to FX). The FX markets are used to trade currencies, and in fact they are actually the world's biggest markets, with transactions totalling trillions of dollars.Trading in FX is always done using currency pairs. The second named currency in a pair is quoted in terms of the first. So for example with GBP/USD (Sterling / Dollar) if the price is 1.9950 this means there are 1.9950 dollars to the pound.

Technical tips

When Trading the FX markets experienced traders are clear on what time frame they are trading. Some like trades to last a few weeks and they tend to look at daily charts; others like trades to last one or two days only and will use shorter term charts such as hourly or 30 minute charts. With the really short term traders who are in an out within the day, they will look at charts such as 15 minute or 5 minute charts. It often happens that the trends on different time frames are different. For instance there might be a clear uptrend on the 5 minute chart, a clear downtrend on the daily chart and a sideways market on the 30 minute chart. The experienced traders will match their strategies to the time frame they are trading.

Trading FX

Fans of technical analysis confirm it works well with FX. Successful FX traders pick a time frame they are comfortable with and tend to focus on just a few currency pairs, rather than trying to trade a lot of pairs. Many just stick with the 3 biggest FX markets: EUR/USD (Euro / Dollar); GBP/USD (Sterling / Dollar - nicknamed Cable); and USD/JPY (Dollar / Yen).

Tradefair Spreads offer a number of markets on currencies to find out more click here

USD/JPY (Dollar / Yen) - the longer term view Price fell below 108.00 in January and since then the 108.00 level has been a barrier (resistance) for USD/JPY, blocking attempts to penetrate it during January and again more recently in June. Many traders trading off the daily chart will be giving this one a miss at the moment, with price hovering just below the 108.00 level and not moving decisively either through the level or away from it. On this timeframe it is a case of wait and see. Some traders will not want to tie up capital until a clear move starts.

USD/JPY (Dollar / Yen) - a shorter term view) But while these traders using daily charts might be standing aside at the moment, shorter term traders will have been finding plenty of opportunities. For instance, looking at an hourly chart over a number of recent days, you can see some quite strong moves both up and down on the chart and with good technical skills it would have been possible to capture a number of these.

Happy trading!

The Tradefair Spreads Team

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