Among the distinctive features of forex, which is a global market, is the opportunity to invest in currencies of world countries. In market language, this event is called “parity”. Before the question “What are your favorite Parities in the Forex market?”, “What is the parity?” It means the value of one country’s currency against another country’s currency. In fact, we are all familiar with the parity issue. “How much in euros?” We have asked this question at least once in our lives or we have witnessed someone asking it. This question questions the euro’s equivalent to your own currency, that is, its parity. This action, used in the buying and selling of currencies, shares the same logic as traditional exchange office transactions. However, in foreign currency investment transactions made through forex, you do not need to have these funds physically and you can perform your transactions quickly over the internet.
How Are Parities in the Forex Market Classified?
The factor that determines the characteristics of currencies is the economic situation of the countries. The currencies of the countries that complete their economic development and make it permanent are defined as “major parity”, and the currencies of developing countries are defined as “minor parity”. You can also hear minor pairs as exotic pairs. The fact that one of the currencies invested is a major parity and the other is a minor parity, is the most preferred form of transaction by our country’s investors. But world investors focus on pairs with high trading volume. Here are the most preferred pairs by investors.
It is the parity formed by the combination of the American Dollar and the Japanese Yen. Profit and loss from trading transactions are evaluated in Japanese Yen. Due to the strong economies of both countries, it is known that high profits can be obtained in the short term with these currencies with high value. But this high gain movement will also bring high risk. These currencies with high trading volume experience frequent fluctuations. For this, the events that occurred in both countries should be followed and the transactions should be started after the effect of the events on the parity is investigated.
The value of the euro against the US dollar. It is known as the pair with the highest trading volume. The world makes 85% of the parity transactions over the EUR/USD parity. Since the profit or loss to be made is paid in US dollars, the American economy should be kept under the spotlight. Price fluctuations are harsh, popular with seasoned traders.
It represents the value of the British Pound against the US Dollar. Known for its strong economy, England is the side that determines the direction of the parity. It is a parity that is over traded by investors. High profits are obtained from price differences. The events that will affect the economy and the macroeconomic data of the UK, which determines the prices, should be followed in detail.
Another parity with a high trading volume is the Euro – Japanese Yen parity. This pair follows a path that has been gaining value in recent years. In EUR/JPY transactions, the Euro is the base currency, while the Japanese Yen is the counter currency. In this parity option, the depreciation of the euro against the US dollar can open the door to profitable trades.
The most popular parity for long-term foreign exchange investment is the Austrian Dollar-US Dollar. The resulting profit and loss is calculated in US dollars. It is known for its low risk ratio compared to other parities. Natural disasters that occur frequently in Austria are among the main causes of fluctuations. One of the most preferred currencies in the Forex market, the Australian Dollar gives confidence to the investor.
SEE ALSO; How to Read Forex Charts ?
You can share your thoughts and questions about the pairs with us under this tweet.Share this article