Currencies’ popularity is largely attributed to Forex trading. Over the course of time, traders have found that binary options offered a simplistic way to trade currencies compared to Forex.
Until the advent of Binary options, currency trading had been the hunting ground of only large financial institutions, while average investors who wanted to try trading were not given the chance to. 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.
Stellar Finance’s trading platform has been crafted in a way that helps traders grasp a deeper knowledge of binary options trading.
Trading currency in binary options does not imply that the trader actually owns the asset but rather, he or she should make predictions based on market mechanism and consequently decide whether the value of the currency will rise or fall.
As said earlier, currency trading existed before the binary options industry. However, 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.
Stellar Finance gives traders the opportunity to enjoy currency trading in the most functional way, with the possibility of a high rate of returns on their investment.
Origin of Currency Trading
One of the most important landmark in currency trading is the creation of the Gold Standard Monetary system in 1875. Experts unanimously agreed on the fact that this event gave birth to 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 came to an end during the beginning of the World War II, major countries felt a pressing need for more military structures thus rendering the Gold Standard as an inadequate form of exchange.
In July 1944, 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.
Furthermore, 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.
Types of Currency Trading
Currencies are only traded in pairs. A currency pair is made up of two currencies encompassing the quotation and pricing structure of the currencies which are being traded. The value of this asset is a rate and is determined by its comparison of one currency to the other. The first currency of the pair is known as the Base currency while the second is the Quote currency.
The currency pair indicates how much of the quote currency is required to purchase one unit of the base currency.
At Stellar Finance, we make sure that our traders have a wide selection of currency pairs to trade on. Additionally, we will continuously strive to add new currencies to make sure that your trading journey is never monotonous.
When you trade on a currency pair, you only need to determine whether the asset will rise or fall in value during a specific time period. If you believe the value of the pair will rise, then place a Call Option, alternatively if you believe that the price of the asset will go down you need to place a Put option. Once a trader has been able to understand the mechanism between the two currencies involved in the Pair, it will be easier for the latter to make the predictions.
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 a day every business day, and 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)
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 are highly volatile.
Economic events: events such as Federal Reserve Interest rates decisions will highly impact on the USD.
Political events: elections in a country heavily impact on the performance of the country’s currency. For example, after Emmanuel Macron was elected French President, the euro was seen falling.
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 Call if you think the price of the chosen asset will rise and select Put if you think the price will fall within the expiry time.