How to buy and sell currency pairs?

Foreign exchange or Forex is a huge market for trading currencies. It involves speculation over the price movements of the currency to earn profits. When a trader buys a currency, then there would be a sale of another currency to maintain the balance and have benefited from the investment. The currency pairs refer to buying one currency and selling another in the forex market. In simple terms, it is forex trading. That is the reason that the currencies are quoted in pairs; USD/EUR is the most common currency pair of the forex market.

A trader purchases one currency when there is a rise or expected rise in future value in comparison to other currencies. Similarly, the trader sells the currency when the value of the currency decreases.

Currency Pairs

Currency pairs are part of the most liquid market of the economy. Where a trader can buy, sell, speculate and hedge against the currencies. The forex market is available for trade twenty-four hours and five days and has a vast volume of trade. The currencies are converted for international trades and investment. The simultaneous purchase and sale of currency take place, and for that reason, currencies are counted as one pair. The currency pairs are traded, where the currency is purchased, and sell of quote currency occurs.

The trader quotes the currency pairs on their bid and asks prices; bid price is the buying price of the currency that the forex brokers buy from a trader in exchange for the counter currency. Opposite of this, ask or offer is the selling price of currency for the quoted currency.

Forex trade is an immense business, gets affected by economic issues like the gross domestic product, economic changes, government decisions or major policy changes. These factors impact the value of the currency in the market. Therefore, it is advised that the investor should consider all the factors before investing and trading in the market.

Process of forex trading

The steps to buy and sell currency pairs are easy with the basic knowledge of the forex market, and at these points, a trader can buy and sell the currencies. Below listed are the steps:-

The first and significant step of trading is deciding the way of forex trading. A trader has two options to deal with the currency pairs - spot forex and forex trading through a broker. Traders should be clear about this before investing. Spot forex or FX spot trading is the buy and sell of currency pairs at an agreed rate between two parties on the settlement day. Trading via a broker is where the trader invests by using a brokerage account and uses the tools and platforms to have a smooth trading experience.

The second step is knowing and understanding the forex market. It is a mandatory ladder of any work or trade. The growth is visible only if the base is strong; that's why a trader should have information about the forex market, how it works and be updated. The forex market involves banks, digital transactions and e-wallets to use them, and how the over-the-counter system is used for trading are basic things for trade. Buying and selling are not easy if the research is not proper; dedicated time and knowledge are essential.

The third point is for opening a trading account; the trader can, through an online process, have an account or, via a reputed broker, manage the account. It is all up to the traders, what they prefer. Without a broker, the trader need not compulsorily deposit funds; when they need to trade, they can deposit, while on the other hand, a trader using a broker account has to deposit a minimum amount to trade. Brokers, however, have more facilities to render than trading on their own.

The fourth step involves having a strategy or trading plan for forex trade. Without a proper plan, buying and selling currency pairs is all waste as it is not secure and can incur a loss. The decisions of the trader are more mature and not based on emotions. It controls the investor's emotions and has calculated trade. The trader has a structure to trade and can even practise virtually online with a demo account facility of the broker.

The fifth step is trading platforms; this is software that has all the tools and technical analysis. Trading is pretty complex if the trader has no trading platform. MetaTrader4 is the best forex trading platform used globally. This platform has a user-friendly interface making it easy and flexible to use. It has features like expert advisors, time-frames, indicators, fundamental and technical analysis and several tools to make trade forecasts. So, having a trading platform and choosing the correct one as per need is necessary for every trader.

Lastly, the traders should open their position in the forex market, where they decide to buy or sell the currency pairs and mark their positions in the forex market. Once the trader knows where to start from the trade, they need to also focus on the risk management techniques to trade safely.

Major Currency Pairs

The most traded currency pair of the forex market is USD/EUR. The most liquid currency pairs due to their volume of trade. The US dollar has the highest price, making other currencies trade with it to become major currency pairs for the traders. Below is the list of the major currency pairs:

• EUR/USD
• USD/JPY
• GBP/USD
• USD/CHF
• AUD/USD
• USD/CAD

Conclusion

Currency pairs are suitable investments when done correctly. However, they require a trader to have proper knowledge and understanding of the forex market. The USD is the source of major currency pairs and the most liquid currency globally. To trade in the high volume market, traders should follow the process of forex trading. The process, as we have seen, is simple and easy with some research of the market. Knowledge is the key to market trading; with the basic information and updated news of price movements, companies and the economy, the traders can achieve the set goals. Profit is easy to gain if appropriately traded, and the buy and sell of currency pairs are all that the trader knows about the market.