Currencies figure among the most popular tradeable assets on global financial markets. Their popularity is largely attributed to Forex trading. Over the course of time, traders have found that binary options offered a simplistic way to trade currency.
Until the advent of Binary options, currency trading had been the hunting ground of only large financial institutions, corporations, hedge funds or extremely wealthy individuals while average investors who wanted to try trading were given a no go. The emergence of the internet, however, brought drastic changes, thus it is now possible for investors of different walks to buy and sell currencies within just a few clicks through online brokers such as Stellar Finance. You do not need to be a financial wizard to be able to trade on binary options, moreover, the platform of Stellar Finance has been crafted in such a way that an extensive knowledge is not required to be able to trade through the online platform of Stellar Finance.
Traders opting for currency trading sees it as a high leverage method compared to other available tradeable assets. It is good to note that, trading currency in binary options does not imply that the trader actually owns the asset but rather would make predictions based on market mechanism and consequently decides whether the value of the currency will rise or fall.
Currency Trading has existed in the binary options industry as far as the binary options industry has been around. In the course of time, traders were given more valuable information. Financial indicators cropped up, giving the opportunity for traders to make more informed decisions when it came to placing trades. There is no doubt that this form of asset will continue to grow in a league of its own bearing a continuous enhancement of the features attached to it.
Stellar Finance provides currency trading so that its traders are able to benefit from this highly profitable asset. Binary options give traders the opportunity to enjoy currency trading in the most simplistic way, with the possibility of a high rate of returns on their investment.
Origin of Currency Trading
To be able to understand the modern context of currency trading, we need to dwell on its past to understand from where it came from. One of the most important landmark in currency trading is the creation of the Gold Standard Monetary system in 1875. Experts unanimously agree on the fact that it is the birth of currency trading.
During the late nineteenth century, it became common practice for all major economic countries to equate an amount of currency to an ounce of gold. The gold standard eventually came to an end for evident reasons. during the beginning of the World War II, major countries felt a pressing need for more military structures,rendering the Gold Standard as an inadequate form of exchange.
This gave birth to the Bretton Woods system. In July 1944, more than 700 representatives from countries involved in the war met in Bretton Woods. In a simplified version, Gold was replaced by the Dollar. The Dollar became the only currency to be backed by Gold, which would eventually lead a downfall of the system.
The system went through several issues during the next 30 years. In the midst of the 1970’s, gold reserve was so low in the US that it became impossible for the Treasury to cover all US Dollars that foreign central banks had in reserve. Which consequently led to the crumbling of the system. On August 15, 1971, U.S President Richard Nixon, refused to change U.S Dollars for Gold, bringing the Bretton Woods system to an end.
Types of Currency Trading
A currency cannot be traded on its own, but through a pair of currencies. A currency pair is made up of two currencies encompassing the quotation and pricing structure of the currencies which is being traded. The value of this asset is a rate and is determined by the comparison of one currency to the other. The first listed currency is generally called the Base currency while the second currency is the Quote currency.
At Stellar Finance, we have made sure that the major currencies pairs have been made available to our traders. It is part of our core belief to provide the most favorable conditions to our traders. We will continuously strive to add new currencies to make your trading journey even more exciting. Binary Options trading make the process of currency trading simple, you are required to only determine whether the value of the asset will rise or fall. If you believe the value of the pair will rise then make a Call Option, alternatively if you believe that the price of the asset will go down you need to make a Put option. This form of trading can prove to be very profitable.
Once a trader has been able to understand the mechanism between the two currencies involved in the Pair, the rest is standard binary options trading procedure. The symbols used with currency pairs are listed as three letters, the first two letters identify the name of the country while the third letter identifies the name of that country’s currency. For instance, USD stands for United States dollars and GBP stands for Great Britain Pound.
The currencies that trade the most volume against the U.S. dollar are known as major currencies. These include the EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD and USD/CAD. All of the major pairs of this asset have very liquid markets that operate 24 hours every business day, and you should note that they have very narrow spreads.
Traders mostly take to the seven most liquid currency pairs available on the market. These can be segmented as follows:
- EUR/USD (euro/dollar)
- USD/JPY (dollar/Japanese yen)
- GBP/USD (British pound/dollar)
- USD/CHF (dollar/Swiss franc)
- AUD/USD (Australian dollar/dollar)
- USD/CAD (dollar/Canadian dollar)
- NZD/USD (New Zealand dollar/dollar)
However there exist a multitude of currency pairs which can be coupled but are usually less sought by traders, these are referred as exotic pairs.
Factors Impacting on Currency Trading
There are several factors which account for the fluctuation in the value of a currency. Currencies keep on fluctuating and is highly volatile. Traders will gain tremendously by understanding the various factors which affect the value of the currency. Broadly speaking, if the economy in the United States receives some positive economic results while the Japan Economy receives negative economic news, the US dollar will likely rise in value against the Japanese, Yen.
Beginners who have just entered the binary options industry might find it a bit challenging. However, the positive side of it is that it does require a lot of time for traders to understand the basic of currency trading and its mechanism before they are able to make a decent consistent profit out of their trades. We have devoted an Educational section where you will be able to master the trick of the trade.
Advanced traders are able to use the news to determine whether the value of a currency will rise or fall in a stipulated time frame. It is important to pay attention to periodic data which are released on a regular basis notably from U.S agencies such as the Federal Reserve.
How to trade Currencies with Stellar Finance?
- Log in your trading account. If you do not possess one, you are kindly requested to open one here.
- Make a choice among our selection of trading tools.
- Once you have your trading tool, click on the currencies feature which is located in the “trading tools” toolbar.
- Choose your preferred pair among the list of currency pairs and set your expiry time.
- Choose for Call if you think the price of the asset chosen will rise and select Put if you think the price will fall within the expiry time.