Didn’t this question already get an answer? In part, yes. You know you are trading currencies, but that doesn’t narrow down, which currencies you should be trading. Are you going to trade any currency that is available through your retail online dealer? Hopefully, you will not. Some brokers offer more than the currencies termed G-7. Currencies from certain countries are not going to have a high volume, liquidity, or profit. So, yes, you trade currencies, but you don’t want to trade every currency pair you could dream up.
Safe Haven Currencies
Safe haven currencies are places investors go when fear is driving the market berserk. During the 2008 subprime mortgage crisis, you can bet that investors started looking around for the best safe haven currencies to invest in and wait for the economic shake up to be over.
There are three currencies that are considered safe havens however, this can change. It all depends on what is happening in the global economy versus a safe haven currency economy.
The USD, CHF (Swiss Franc), and JPY (Japanese Yen) have been the most consistent choice for safe haven currencies. Of course, you can also look at 2008 and the drop in value of the USD to know that it was not considered safe at all. Instead, the dollar lost a great deal of value against the GBP (Great British Pound) and euro (EUR).
The USD is considered a safe haven currency because people believe in the strength of the USA. Globally, this has changed due to high deficit, without questions about the USA gold reserves. Sentiment can change in favor of the USA again given how it bounced back and helped other nations, as part of the UN and EU. The USD often appreciates when there is a bleak outlook, but as history shows not always.
The CHF is backed by gold. The other reason it is a safe haven currency is the stable Swiss economy and low inflation. The Swiss do not seem to have huge fluctuations, but rather a stable, steady, dependable economy. The Japanese Yen became a safe haven currency due to the government debt Market.
Japanese public debt is not held by foreign governments, but by individual Japanese investors. It provides more stability and less incentive for the Japanese government to use inflation as a tool to correct economic issues. Japan’s government does not need to use inflation to correct debt issues, which other countries have done. Currencies with less risk of an inflation tool are considered safer.
Safe haven currencies may be where you wish to begin your forex journey or at least where you will want to rest your money when you are not actively investing.
G-7
There are currency groups that are also considered more liquid and voluminous than others. The G-7 is the original group, but today other countries have caught up to be major global powers. This has led to the G-20.
The G-7 countries account for nearly two-thirds of the global GDP (gross domestic product). The G-7 currencies are:
1. Canada
2. France
3. Germany
4. Italy
5. Japan
6. UK
7. USA
The G-20 currencies include, but are not limited to the G-7 and the following countries:
Brazil
China
India
Russia
From these countries you have what are called major currency pairs and major cross currency pairs. The major currency pairs are:
1. EUR/USD
2. USD/JPY
3. GBP/USD
4. USD/CHF
5. USD/CAD
6. AUD/USD
7. NZD/USD
You need to know that there is a standard way of writing currency pairs. The standard comes from the International Standardization Organization or ISO. The above currency pairs are in the ISO format. If you see a site offering one of these pairs reversed, then you do not want to trade with that broker. The only time you should see a currency pair not in ISO form is when you go to a bank and ask to exchange your domestic currency for an international currency, for travel purposes. Some websites like currency converters will also tell you the current rate for non-ISO pairs to help you plan your trip. A broker, market maker, or other dealer should always have their pairs in ISO form.
You need to know that there is a standard way of writing currency pairs. The standard comes from the International Standardization Organization or ISO. The above currency pairs are in the ISO format. If you see a site offering one of these pairs reversed, then you do not want to trade with that broker.
The only time you should see a currency pair not in ISO form is when you go to a bank and ask to exchange your domestic currency for an international currency, for travel purposes.
Some websites like currency converters will also tell you the current rate for non-ISO pairs to help you plan your trip. A broker, market maker, or other dealer should always have their pairs in ISO form.
Major Cross Currency Pairs
Major currency pairs involve the USD. However, there are times when you may not wish to trade the USD. For those instances you have the major cross currency pairs. Cross pairs do not include the USD.
You have euro, yen, sterling (GBP), and other cross pairs. As the name denotes, if you are trading euro crosses then the euro is involved in each pair like the USD major pairs. So, you would see these available ISO pairs:
EUR/CHF
EUR/GBP
EUR/CAD
EUR/AUD
EUR/NZD
Japanese Yen pairs will always have the JPY as the quote currency. The JPY pairs involve six of the major country currencies: euro, GBP, CHF, AUD, NZD, and CAD.
When trading sterling crosses, you have four options, all of which have the GBP as the base currency:
1. CHF
2. CAD
3. AUD
4. NZD
Other crosses include the ISO pairs:
AUD/CHF
AUD/CAD
AUD/NZD
CAD/CHF
Just with the G-7 major pairs and the major crosses you have plenty to check on and determine if you wish to trade them. It is a good place to start when you are a beginner. Once you have mastered the G-7 and what to look for in a currency pair, you can move on to other currency pairs.
The aim of your trading plan needs to be a high profit with minimal loss. Your P&L statement at the end of 12 months should reflect a profit, with no lost capital.
Safe Haven Currencies
Safe haven currencies are places investors go when fear is driving the market berserk. During the 2008 subprime mortgage crisis, you can bet that investors started looking around for the best safe haven currencies to invest in and wait for the economic shake up to be over.
There are three currencies that are considered safe havens however, this can change. It all depends on what is happening in the global economy versus a safe haven currency economy.
The USD, CHF (Swiss Franc), and JPY (Japanese Yen) have been the most consistent choice for safe haven currencies. Of course, you can also look at 2008 and the drop in value of the USD to know that it was not considered safe at all. Instead, the dollar lost a great deal of value against the GBP (Great British Pound) and euro (EUR).
The USD is considered a safe haven currency because people believe in the strength of the USA. Globally, this has changed due to high deficit, without questions about the USA gold reserves. Sentiment can change in favor of the USA again given how it bounced back and helped other nations, as part of the UN and EU. The USD often appreciates when there is a bleak outlook, but as history shows not always.
The CHF is backed by gold. The other reason it is a safe haven currency is the stable Swiss economy and low inflation. The Swiss do not seem to have huge fluctuations, but rather a stable, steady, dependable economy. The Japanese Yen became a safe haven currency due to the government debt Market.
Japanese public debt is not held by foreign governments, but by individual Japanese investors. It provides more stability and less incentive for the Japanese government to use inflation as a tool to correct economic issues. Japan’s government does not need to use inflation to correct debt issues, which other countries have done. Currencies with less risk of an inflation tool are considered safer.
Safe haven currencies may be where you wish to begin your forex journey or at least where you will want to rest your money when you are not actively investing.
G-7
There are currency groups that are also considered more liquid and voluminous than others. The G-7 is the original group, but today other countries have caught up to be major global powers. This has led to the G-20.
The G-7 countries account for nearly two-thirds of the global GDP (gross domestic product). The G-7 currencies are:
1. Canada
2. France
3. Germany
4. Italy
5. Japan
6. UK
7. USA
The G-20 currencies include, but are not limited to the G-7 and the following countries:
Brazil
China
India
Russia
From these countries you have what are called major currency pairs and major cross currency pairs. The major currency pairs are:
1. EUR/USD
2. USD/JPY
3. GBP/USD
4. USD/CHF
5. USD/CAD
6. AUD/USD
7. NZD/USD
You need to know that there is a standard way of writing currency pairs. The standard comes from the International Standardization Organization or ISO. The above currency pairs are in the ISO format. If you see a site offering one of these pairs reversed, then you do not want to trade with that broker. The only time you should see a currency pair not in ISO form is when you go to a bank and ask to exchange your domestic currency for an international currency, for travel purposes. Some websites like currency converters will also tell you the current rate for non-ISO pairs to help you plan your trip. A broker, market maker, or other dealer should always have their pairs in ISO form.
You need to know that there is a standard way of writing currency pairs. The standard comes from the International Standardization Organization or ISO. The above currency pairs are in the ISO format. If you see a site offering one of these pairs reversed, then you do not want to trade with that broker.
The only time you should see a currency pair not in ISO form is when you go to a bank and ask to exchange your domestic currency for an international currency, for travel purposes.
Some websites like currency converters will also tell you the current rate for non-ISO pairs to help you plan your trip. A broker, market maker, or other dealer should always have their pairs in ISO form.
Major Cross Currency Pairs
Major currency pairs involve the USD. However, there are times when you may not wish to trade the USD. For those instances you have the major cross currency pairs. Cross pairs do not include the USD.
You have euro, yen, sterling (GBP), and other cross pairs. As the name denotes, if you are trading euro crosses then the euro is involved in each pair like the USD major pairs. So, you would see these available ISO pairs:
EUR/CHF
EUR/GBP
EUR/CAD
EUR/AUD
EUR/NZD
Japanese Yen pairs will always have the JPY as the quote currency. The JPY pairs involve six of the major country currencies: euro, GBP, CHF, AUD, NZD, and CAD.
When trading sterling crosses, you have four options, all of which have the GBP as the base currency:
1. CHF
2. CAD
3. AUD
4. NZD
Other crosses include the ISO pairs:
AUD/CHF
AUD/CAD
AUD/NZD
CAD/CHF
Just with the G-7 major pairs and the major crosses you have plenty to check on and determine if you wish to trade them. It is a good place to start when you are a beginner. Once you have mastered the G-7 and what to look for in a currency pair, you can move on to other currency pairs.
The aim of your trading plan needs to be a high profit with minimal loss. Your P&L statement at the end of 12 months should reflect a profit, with no lost capital.
