How to trade the Pound in Forex  - XAUBOT

How to trade the Pound in Forex 

forex-pound

The British Pound is one of the most important currencies in Forex  worldwide that constitutes a large proportion of all trading activities that occur in various financial markets. It is also one of the most important financial instruments in the foreign exchange market. 

Due to the vastly influential economy and politics that are behind this currency, the British Pound is indeed among the most important vehicles for value across all financial markets and given all financial instruments. 

So in this article we want to bring the British Pound under speculation in our analysis and see how you can benefit through trading this currency in the forex market.

forex-pound

 

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A Glance at the British Pound in Forex 

As far as currencies go, the Pound Sterling is truly a crowning jewel. It has many distinctive features that have made it into such a unique and powerful currency. Before discussing trading this currency in the forex market, let’s take a look at some of the salient features. 

First of all, Pound Sterling is the oldest standing currently in the world. It has been in circulation and use ever since around 800 AD which makes it more than 1200 years. Being the oldest currency in the world and having stood the test of time after all these many years, it really means there is something special about the Pound Sterling. 

It draws most of its power, naturally, from the Royal family and the overall political power of the United Kingdom. 

But in any case the British Pound is responsible for a large sum of the traded volume in the world.

forex-pound-british

 

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Why Trade the British Pound in the Forex Market? 

There are many reasons why it would be a good idea to trade the British Pound. First of all, it is one of the most powerful and reliable currencies in the world. So whether you want to scalp or take a more long-term approach to trading, the British Pound can satisfy your trading conditions and requirements. 

Secondly, the Pound Sterling is among the top 5 most traded currencies worldwide. As we mentioned above, with a daily trading volume of around $500 billion, the British Pound is able to provide forex traders with the trading volume and high liquidity required for profitable trades with many different strategies. 

Furthermore, the British Pound is a globally recognized currency. Similar to the US dollar, you can use it in almost all financial markets as the base currency for financial activities including trading. 

Last but not least, the British Pound is part of several trading pairs in the forex market. This gives you the upper hand to choose the most suitable and potentially profitable pair to trade with. 

In the next section we will take a look at where the British Pound gets its power and strength from.

forex-pound-trading

 

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Why Is the British Pound so Valuable? 

In order to be able to trade the Pound in the best way possible, you need to have a clear understanding of this currency. So in this section we will discuss why the Pound is so powerful and in the next section we will show you the factors the most influence this currency. 

Among the most important reasons as to why the British Pound is so powerful we can discuss the following: 

  • Trading volume: one of the most important aspects to the strength of the British Pound is the sheer volume of trades that are carried out with this currency. When hundreds and hundreds of billions of dollars are being traded in this currency, not just in the forex market but across different financial markets, it gives credence to the Pound. 
  • Global acceptance: with this extremely high trading volume, it is only natural that this currency has a high rate of acceptance in different countries and different markets around the world. You can use the British Pound as the base currency for countless financial activities. 
  • Powerful economy: it is no wonder that the United Kingdom has one of the world’s most powerful economies. When any currency is backed by such economic power, then it is only natural that it would be this big. 
  • Political factors: another important factor that influences not just the Pound but all currencies in the forex market is politics. Political events can impact currencies directly. The political and diplomatic might of the UK is undoubtedly an important factor in why the British Pound is so precious and valuable.

forex-pound-trader

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Which Forex Pairs Include the British Pound? 

So, let’s see which pairs include the Pound in the foreign exchange market. Before we discuss the pairs, you need to know that each trading pair in forex is made of two currencies. The first one is usually known as the base currency and the second one is the quoted currency. In all trading pairs, the base currency is denominated by the quoted currency. This means you need to speculate how much base currency you can buy in exchange for the quoted currency and also how much of it you can sell in exchange for the quoted currency. 

Almost all currencies are invariably both of these in the forex market. The same is true with the Pound, as we will see. 

Here are some of the most well-known trading pairs that include the British Pound: 

  1. GBP/USD: the British Pound denominated by the US dollar  
  2. EUR/GBP: Euro denominated by the British Pound
  3. GBP/AUD: the British Pound denominated by Australian dollar 
  4. GBP/CAD: the British Pound denominated by Canadian dollar 
  5. GBP/CNH: the British Pound denominated by the Chinese Yuan 
  6. GBP/CHF: the British Pound denominated by the Swiss Franc 

While there are many other pairs in the foreign exchange market that include the British Pound, the above list includes those pairs that have the highest trading volume and the highest popularity among forex traders. 

 

Conclusion 

The British Pound is the oldest currency in the world that is still being used today. Among the most traded currencies worldwide, Pound ranks number 5 with near $500 billion in daily trades. In this article we took a closer look at this vastly influential currency and discussed the different currency pairs that include the Pound in the forex market. 

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