Which Foreign Currency should you trade? That varies and depends on the activity of the various currency pairs in the market at the time. Every traveler to another country trades foreign currency usually just exchanging the money they bring from their own country for the money of the foreign country. At times the currency exchange takes place in a bank or at a money changer or it occurs just by withdrawing local currency from a machine using your ATM card.
Few travelers changing their money in another country realize they are in the world of foreign exchange currency trading. If travelers spent a little time before going on their overseas trip just learning a bit about forex exchange markets they could probably pay for part of their traveling expenses just from the foreign currency purchases they make either before or while they are overseas.
Whether you trade foreign currency just by being a traveler or as a professional forex dealer the business side is basically about buying and seling money. The exchange rate is determined not so much by the individual money changing establishment but by the Interbank market. Banks swap currencies globally electronically through the system named the Interbank market. It has no geographic location as it exists only in cyber-space. Through high speed computers and internet connections banks are able to quote rates they are willing to buy at and sell at for each currency against another currency in pairs. There are 6 major currency pairs that most forex dealers trade. The most popular are EUR/USD, AUD/USD, GBPUSD,USD/JPY,CHF/USD. When starting off your currency trading career it is easiest to start trading the Euro against the US Dollar. It has by far the largest following and thus has the greatest liquidity. Daily average moves on the EUR/USD pair average 100 pips. Which means you can make $1,000 a day just trading that pair.
The minor currencies are usually converted into one of the major currencies first and then the cross rates between the minor currencies can be determined. As anyone now can trade currencies on the internet with their laptops it is possible to trade foreign exchange currencies from anywhere in the world. This is where the traveler can gain an edge over the money changers in overseas countries. Simply by having an understanding of how the foreign exchange market works and being able to access real-time live currency prices via the internet you can walk into the local money changers in Bangkok, Hong Kong, Manila, Istanbul - in fact any city in the world, with more knowledge and information than the clerks and attendants who buy and sell you money.
As the street money changers are relatively unsophisticated it is usually possible for you to obtain a better rate than they first quote - they have a degree of flexibility in the final exchange rate they can give to you. If you know what the interbank was the moment before entering the money changer establishment you can negotiate a rate not only lower than the clerks first offer you but at times even below the current interbank rate - as there is some delay in the relay system which tells the clerks what the prevailing rates are and then for them to adjust their quotes to the walk-in customers. This same relay delay also operates in most retail establishments and especially in overseas hotels.
How would you like to cut $100 of the cost of your hotel accommodation the day you checkout? Or buy expensive jewelery at a discount beyond what the local traders are prepared to offer? The key is being able to the negotiate the price you pay in various currencies. Before setting out on your morning's activities simply access the latest currency prices on the hotel computer or your laptop. Read the news reports and market analysis. Check the currency charts and you will be able to have a fair idea of where the various currencies are headed for the day. Some quite regularly fluctuate widely during the day but return to the prices where they started the day.
Also important in the process is knowing the various time zone peculiarities. The world currency markets open everyday in New Zealand and move westward - just like the wagon trains. For the early part of the trading day the Asian markets are most active - with the Asian currencies and Aussie dollar being heavily traded. Later in the day the London market opens - overlapping the closing Asian currency market - and so the Euro, Pound, Swiss Franc are most actively traded. By evening the New York market opens and there is an overlap with the London market.
There are a lot of opportunities to capture large profits trading your forex account during the market sunrise openings, especially for the British Pound (GBP), and also during the market overlap periods. One of the beauties of trading the London Sunrise forex market is there is even automated trading robots programed to do the trading tasks for you.
A few minutes work can give you $1,000 or more profit on a standard size one contract with your forex broker. Even without making any trades in your forex account you can use the market knowledge and skills you have learned in being able to assess the direction of currencies to make money buying and selling currencies in the streets overseas - visiting money changers or simply bargaining with local merchants the price for their wares in various currencies.
While it is possible for anyone to make money in this way it is essential to learn more about how to conduct the business. An obvious starting place is to educate yourself and simply learn forex.
