Determining the Price of Major Currency Pairs
The main reason why we recommend novice investors to deal with major currency is pairs is simple: volume. These are the currencies that attract the largest amount of transactions. As a result, novice investors can expect more bang for their buck, so to speak.
When there is a greater deal of trading volume, there is a greater chance for the strategies that we have highlighted throughout this book to work. When there is a smaller trading volume, the strategies which we have presented herein may not hold up quite as well. This is why dealing with lesser-known currencies should be done under very strict supervision.
That being said, the price of major currency pairs is set by supply and demand. This is why a large trading volume tends to minimize significant shifts in the price of major pairs. On the contrary, currencies that don’t have a large trading volume may suffer significant shifts from a single trade. This can ultimately ruin your chances of making a profit.
With large, institutional investors, the kind that have positions in the millions of dollars, they tend to choose major currencies over lesser-known ones because the supply is large enough to hold such large trading positions. So, smaller investors can ride the coattails of large investors. When you trade along with the big firms, you can ride the top of the wave. This may not yield you millions of dollars, but it is certainly a great way of making a healthy profit.
For example, the EUR/USD rate sits at 1.10. This means that the cost of 1 Euro is $1.10. If the price suddenly moves to 1.12, it means that the Euro has gained value against the dollar as it costs more dollars to purchase a Euro. However, if the price drops to $1.08, then the dollar has gained value as it costs fewer dollars to purchase one Euro. Depending and what you’re banking on, you can come out on top. The main thing to keep in mind is that the various factors in the market will ultimately determine the behavior of the price action among the major pairs. So, always be on the lookout.
Investing in Cryptocurrency
In recent years, cryptocurrencies, or cryptos, have become quite popular, especially after the meteoric rise of Bitcoin. The wild ride that saw Bitcoin soar to over $20,000 per coin landed cryptos on everyone’s radar. Given the massive upside of cryptos, practically anyone that could get into the crypto market did. Unfortunately, some got hammered when the price of Bitcoin fell back down to Earth. Nevertheless, Bitcoin is not the only game in town.
Yet, cryptos are not widely understood by the average investor. That’s why we are going to go over what cryptos are and how you can make money on from trading in cryptos. Additionally, you will find that cryptos are still in their infancy. This means that there is a massive upside which you can exploit.
It is important to underscore the fact that cryptos are not money in the traditional sense. A cryptocurrency is a type of digital token that can be used to settle transactions, among other uses. For instance, is one individual sells a car to another, the deal can be settled by exchanging digital tokens as opposed to using traditional currency. This is what makes cryptocurrencies so interesting to the average investor.
When you deal with cryptos, you are essentially dealing with 1s and 0s. These can be used for identification purposes, keeping track of volume, and even to facilitate government actions. Indeed, there are many types of uses for cryptos.
At this point, the expression of cryptos’ value is seen in traditional currencies such as US Dollars. In this case, you can purchase cryptos by exchanging US Dollars (or any other accepted currency). The digital tokens are stored in a virtual wallet or vault. This vault contains the codes that lead to the access of your coins. You can then trade them to other users in exchange for other tokens, or traditional currency.
It should also be noted that cryptos don’t trade like currencies do on the FOREX market. They trade more like commodities. A good example we can use to compare the value of cryptos is oil. Oil is a commodity and is traded at spot price. Spot price means the current price of the commodity at the time the trade is placed. Consequently, the same market forces apply here. Supply and demand are what drive the valuation of all cryptos. Some have an enormous issuance, such as millions of coins. Depending on their popularity, investors may choose to pay an increasingly higher value for them.