Why Forex Brokers Need to Know about Different Currencies

Why Forex Brokers Need to Know about Different Currencies

Tradeview – When you’re an international investor looking to make money, one of your best bets is to invest in the foreign exchange market, or forex. Trading currency and cashing in on its value fluctuations can be extremely profitable—and it can also help you diversify your portfolio with opportunities outside of the United States and Europe if you’re already invested there. As one of many forex brokers, you probably know this already, but if you haven’t yet ventured into the world of forex trading, now’s the time! But how do you get started?

The U.S. Dollar

Despite what you may believe, currencies do not all equal out. Currencies are traded in pairs against each other. The pairing might be the Euro and the U.S. dollar or two different countries, but the goal is to find where one country’s currency is trading more expensive than another on a global scale and make a trade, purchasing the cheaper one and selling it at a higher price elsewhere. One example of this strategy in action was when China devalued its Yuan in 2015 because traders were buying less Chinese products because they became less inexpensive to make with American goods priced comparatively lower by comparison. This provided a perfect opportunity for forex brokers who had noticed this trend before it happened and continued making trades based on their predictions of where the market would go next.

The Euro

As of March 31, 2015, the Euro trades at $1.1-1.2 US dollars. As a currency with over 16% of its trade being between non-Eurozone nations, there are many reasons why forex brokers should consider this when trading their clients’ currency in this market place. Understanding both risks and advantages could make all the difference in decision making for your clients’. Here’s some basics to help you get started

The British Pound

There are many forex brokers who are ready to trade in foreign exchange and have the opportunity to profit from a variety of currencies. But what they may not know is that they can also use these opportunities to mitigate the risk of changes in foreign exchange rates and fluctuations. A foreign currency is just that- another country’s currency. All currencies have their own identities and traders look for them because they represent value, global events, and sustainability of national governments in that country. By understanding the nuances of each one, you’re on your way to becoming a pro forex trader with better options when it comes time to make a decision on an FX trade

Swiss Francs

The Swiss franc (CHF) is the most popular currency among forex traders for three main reasons: first, it trades in a tight range relative to the Euro; second, its stable interest rates make it less prone to violent movements in currency exchange rates than other currencies; and third, it is considered one of the world’s strongest currencies. This means that those who buy the CHF will see their investment grow relatively steadily when compared with fluctuations of other currencies that could be significantly higher or lower in value. 

Forex brokers are able to increase their profits by trading on three major currency pairs that correlate with one another and can also take advantage of more than one exchange rate per day.

Canadian Dollars

Due to the differences in interest rates, foreign exchange rates and commodity prices, various currencies will vary in their values. This can be confusing, especially when brokers are based outside of Canada and provide quotes only in US Dollars. Before you get started with a broker account, it is important that you know what the currency symbols are for each of the major currencies. In Canada, our primary trading partner is the United States which means we trade mostly in Canadian Dollars (CAD). Other common trading pairs with CAD include: Euro (EUR), British Pound (GBP) and Japanese Yen (JPY). This allows a forex broker to enter into trades without converting from their native currency.

Australian Dollars

Understanding the Australian dollar is critical for forex brokers because of the size and scope of their trade markets. With close to a billion people, including some 180,000 millionaires and more than 750,000 millionaires, Australia is a key market for goods and services for forex brokers. Australians also need work so jobs outside the country are a major draw in terms of seeking work abroad.

Knowledge of Australian dollar history makes it easy to get an idea of how it works relative to other currencies. Formed as a penal colony back in 1788, today’s Australia has had plenty of ups and downs in its relationship with other countries – from once being rich on natural resources but devastated by war to becoming one of the world’s wealthiest economies following independence from British rule.

Chinese Yuan Renminbi (Yuan)

What do forex brokers need to know about the Chinese Yuan Renminbi? A lot. The value of a country’s currency is an integral factor in determining its economy, so it should be crucial for forex brokers who want to continue getting involved in global trade. Forex brokers will have their clients’ interests at heart and can provide clear guidance on how business owners can manage the risks and take advantage of the opportunities related to fluctuating currencies.

Hong Kong Dollars (HKD)

There are many forex brokers and traders who don’t know about HKD and how it differs from other currencies. If a trader doesn’t understand the basics of how HKD interacts with another country’s currency, they can be making some mistakes that they might not realize, which could cost them big bucks in the long run. For example, let’s take a Canadian forex trader and see what would happen if they didn’t have knowledge of HKD. Let’s assume that our Canadian forex trader does their trades in CAD and trades EUR/USD, for instance. They think that the USD has risen enough versus EUR for them to now sell all their EUR at a profit because CAD has risen against EUR as well.

Indian Rupee (INR)

There are many different currencies in the world. Forex brokers need to understand these differences in order to work on international transactions and provide investors with the best services. The most popular types of currency in the world today are fiat currency, commodity, or basket currencies. As such, it is important for forex brokers to be well-versed with these different types of currencies if they want to remain competitive and have a strong client base. For example, if a broker is only knowledgeable of one type of currency he may not be able to serve clients who primarily use another type of currency.

Russian Ruble (RUB)

The Russian Ruble (RUB) is the currency of Russia and it is the forex brokers’ responsibility to know everything there is to know about this currency. Currency rates are constantly fluctuating and so it’s important for a forex broker to monitor them on a regular basis. This prevents any unfavorable changes in values that would occur due to not being aware of where the currencies are at. Additionally, because of all the economic and political turmoil that has been happening in Russia, investors need all of the information they can get when investing their money in this country’s markets. It’s essential for a forex broker to keep their clients informed, because then they’ll be able to make smart investments knowing how volatile this market is.