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Trading Forex- outside the dollar.

By : Mike P. Kulej
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Almost all newcomers to the currency trading start their journey with the so called "majors". And not surprisingly so. These instruments are the most popular, most liquid, and most prominent. They are also all dollar based.

What are the "majors"? While there is no formal definition for that term, "majors" are the USD denominated currency pairs. Virtually every time you enter a forex broker's site, you will see a rates table. This table will always contain quotes for following pairs : EUR-USD, USD-JPY, GBP-USD and USD-CHF. These are the "majors", followed closely by a smaller group of so called "commodity pairs": USD-CAD, AUD-USD and NZD-USD.

USD dominance in Forex trading should come as no surprise to anybody. After all, United States is the world's single largest economy, most commodities are priced in USD and international trade in goods and services is mostly quoted in green back. To top it all off, dollar is also the core of foreign reserves held by central banks of most nations.

Times are slowly changing, however, and anybody who trades Forex should take a closer look at some of the other instruments available in foreign exchange arena. Those are commonly referred as "crosses", which could be any combination currencies mentioned above. Bear in mind, that not all brokers offer a full spectrum of "crosses", but generally they offer enough to make it a worthwhile pursuit.

Some of the most popular combinations of late include JPY, due to the much vaunted "carry" trade. Especially currencies with relatively high interest rates, like NZD and AUD, have enjoyed a massive rise in volume in their respective JPY crosses. Another one of very popular Yen crosses is EUR-JPY. This one has bigger daily ranges then USD-JPY and, depending on the trading platform, comparable spread, a very compelling factor.

Other very popular and important crosses involve EUR, the European currency. EUR-CHF, for example, is, in fact, more active at times then USD-CHF. Currently, Euro is regarded as world second most imported currency, so it can be traded against virtually any currency in existence, just like the dollar.

Let's not forget GBP, the speculators favorite. Due to large daily moves , GBP-JPY and GBP-CHF have long been attractive to traders seeking a lot of action and fast moves. It's not unusual to see a daily range of 300-400 pips in GBP-JPY. A lot of money can be made or lost in a day on moves like that. As a matter of fact, all GBP crosses can experience truly dramatic daily moves. While the spreads here are not as attractive, they have come down over last few years, no doubt because of increased interest in cross trading.

There is a wide selection of other crosses available for trading, but that is different from broker to broker. Some offer more, some less and the terms of trading vary widely. Those include CAD, NZD, AUD and, frankly, a myriad of other combinations. Not all of them are necessarily suitable for everybody but they are available. We'll leave that for some other time.

We just scratched a surface of Forex landscape here, but as you can see currencies trading is not limited to a handful of majors. There is a lot more going on outside the dollar. Take a look, do some homework and explore. A world of opportunities awaits.



About the author:
Mike Kulej is a Chief Forex Strategist for Spectrum Forex LLC., and a creator of highly effective "Rainbow" trading system. He specializes in mechanical trading systems as explained on forex.com" target=_blank>www.spectrumforex.com . Spectrum Forex LLC offers numerous services to individual traders. With questions and comments e-mail him at forex.com">kulej@spectrumforex.com.


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