How can You trade the GBP/USD?
Last but not least, trading with a regulated and trustworthy brokerage is the best way to trade forex online while keeping risks to a minimum. Regulated by the FSCA, CMTrading is one of Africa’s top local brokers. Open a live trading account and enjoy advanced trading tools and a personalized educational package!
What factors influence the GBP/USD?
What to consider when trading the GBP/USD?
The long history, stability, and the economic stature of the United Kingdom and the United States makes the GBP/USD one of the most widely traded currency pairs. This, in turn, translates into a highly liquid market, so traders can enjoy numerous trading opportunities throughout the day.
However, the global currency markets can be difficult to navigate at times, and this currency pair is no different. Those choosing to trade it should keep a close eye on the GBP/USD price chart and develop their trading strategy accordingly.
In the currency market, the GBP/USD – also known as the cable – is the third most traded pair after the EUR/USD and USD/JPY.
Here are the top reasons why GBP/USD is so popular:
How to be successful
To be successful in trading this pair, it is important to understand the dynamics of these affiliations and how they affect the currency movements. Whenever a G20 or G10 meeting is held, the lead-up and outcome could affect the currency pairs.
A major change with the UK is its decision to leave the European Union. This had major implications on the British pound. Similarly, the past US election has proven to be extremely volatile for global markets. Understanding how politic events will affect either of these pairs will determine how successful you can be.
WHY IS IT called the Cable?
It is known as the Cable because the first transatlantic cable was laid from the United States to UK for communication purposes, under the Atlantic Ocean, in 1858. The cable allowed currency quotes and other key economic information to be transmitted through the system.
Two economies to understand
To successfully trade any currency pair, you need to understand that you are dealing with two economies. Without a detailed understanding of how the US and the UK economies work, you won’t be able to make good trading decisions.
Questions you should be asking yourself:
Asking and answering the above are some of the key points you should focus on.
If the US announces a trade embargo against China but the UK maintains trade, you can expect the USD to go down and the GBP to rise.
When trading any currency pair, timing is very important. There are two times when the volumes of the trade are optimal for the USD/GBP – 3am and 4am EDT. This happens at the intersection of the European/Asian markets and intersects the European/American markets. Most orders are placed during this time.
Major breakouts often occur when the European markets open. In addition, major economic movements affecting the two currencies are released during the European and US sessions.
The BEST TIME TO TRADE GBP/USD
The best time to day trade the GBP/USD is during the European session. This is because the UK releases most of its economic data during this time. Volume and volatility increases during the American session.
There is usually a lot of volume trades during the opening of the American market because the most economic figures are released.
FUNDAMENTALS THAT MOVE THE GBP/USD
There are several fundamental factors that traders should consider when trading the GBP/USD pair.
Here are some of the major factors:
Other factors that can affect the GBP/USD are geopolitical events, retail sales, and industrial production.
How to trade GBP/USD CFDs
The GBP/USD is one of the five major currency pairs in the forex market. It is also one of the oldest tradable currency pairs on the market. An individual can trade GBP/USD with either a forex contract or alternatively, they can trade a Contract for Difference (CFD) on a particular currency pair. This allows you to speculate on the price difference without owning the underlying asset.
Did you know?
Trading tThe GBP/USD pair, also has been known as the ‘trading the cable’ since the 1800s., is where the trader sees how many US dollars are worth one Great British pound.
If the pair is quoted as trading at 1.50, it means it takes $1.50 to buy a single pound.
This pair is among the five most traded currency pairs in the foreign exchange market.