The forex market is a vast and lucrative financial entity, and one that sees more than $6.6 trillion traded every single day.
This market allows investors to trade international currency in pairs as derivative assets, enabling them to profit through speculation even as target pairings begin to depreciate over time.
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But what’s the difference between trading forex and futures, and what are the best currency pairs to consider trading right now?
Trading Forex vs. Futures – The Key Considerations
In the case of forex trading, investors trade currencies in real-time and deploy strategies that look to realise short, medium or long-term profits.
In contrast, forex futures create a scenario in which individuals can trade their opinions on the economic prowess of different and specific nations across the globe. In this scenario, forex futures represent the value of an overseas currency in US dollars at a specified value and poin time, with most options covering a period of three months or less.
One of the main differences here is that forex futures are priced in the contract in US dollars per unit of foreign currency, while such agreements also have a specified expiration date in which your investments must deliver a yield.
Appraising the Top Three Currencies in the Current Market
At this stage, all that’s left is for us to appraise the three leading international currencies in the existing marketplace. Here’s our top picks!
We’ll start with the single most popular and prominent currency pairing, and one that accounts for more than 20% of the market’s global daily trading volumes.
The popularity of this pairing can largely be attributed to the relative size of the respective economies involved, while it should also be noted that the greenback is established as the world’s most dominant reserve currency.
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Make no mistake; this pairing is definitely formidable in terms of liquidity and volume, while it also tends to correlate negatively with the USD/CHF in the daily marketplace.
Next up is another highly liquid (albeit slightly sensitive) asset, and one that is largely driven by the political circumstances that exist between the two nations.
This pairing is also considered as a relative safe haven thanks to the durability of each individual asset, while it typically correlates positively with both the USD/CHF and USD/CAD.
The greenback is featured once again in our third and final listing, alongside its neighbour Canada (which is also home to a burgeoning and impressive economy).
Interestingly, this pairing is commonly referred to as the “loonie”, thanks to its increased level of volatility and ability to deliver relatively sizable gains to investors.
This pairing typically correlates negatively with a raft of assets, including the AUD/USD, GBP/USD and EUR/USD, making it an interesting hedge and a true standout amongst major currency pairs.