Forex, also known as the Foreign Exchange market or simply FX, is the biggest, most liquid financial market in the world. This is the marketplace where the world’s currencies are traded and where trillions of U.S. dollars alone are exchanged on a daily basis. The prominent financial instrument gives investors opportunities like no other market. Read more below about the USD/CAD, one of the most popular currency pairs among traders and find out how to trade it effectively.
The U.S. Dollar/Canadian Dollar Currency Pair – Overview
The USD/CAD tells the trader how many Canadian dollars (the Quote currency) are needed to purchase one U.S. dollar (the Base currency). Its value is quoted as 1 U.S. dollar per X Canadian dollars, meaning that in case the pair is trading at 1.40, it will take 1.4 CAD to buy a single USD. Often referred to as the ‘Loonie’, the USD/CAD is considered the most traded currency pairing on the Foreign Exchange involving the Canadian dollar. Moreover, along with the USD/NZD (New Zealand dollar) and the USD/AUD (Australian dollar), it is classified as a commodity pairing due to the fact that both Canada and the United States possess significant amounts of commodities.
The amount of USD in circulation is controlled bythe Federal Reserve Bank (FED), America’s central bank.The monetary policy and the interest rates that determine the value of the currency are released eight times per year by the Federal Open Market Committee (FOMC). The U.S. dollar acts as the world’s reserve currency, as around 62% of global foreign exchange reserves held by central banks are denominated in this currency.
On the other hand, the Bank of Canada (BOC) and its Governor control the amount and circulation of the Canadian dollars. They are also in charge of the monetary policies and establishing the interest rates of the currency eight times per year.
How to step up your forex gamewith the USD/CAD currency pair
In a prominent market like forex, it stands to reason that there are endless possibilities available to investors. Nonetheless, there are a few unwritten rules you need to follow in order to succeed. Let’s discuss the most important ones!
- Trading with a professional broker is paramount.
The platform where you choose to operate your trades on must be secure and equipped with the necessary tools to facilitate your experience. Forex is a high-risk market and the services that the broker puts on the table need to help you, not stand in your way. TradeFW.com is an online broker that provides you with cutting-edge technology, the highest levels of professionalism and consideration. They put at your disposal an advanced & modern platform, a comprehensive amount of resources to assist you in making the right trading decisions regularly and keep up with the news related to the USD/CAD currency pair, as well as a team of experts so you can trade at ease knowing they are beside you every step of the way. Take your time and choose wisely, your success depends on it!
- Planning ahead can make a difference.
You’d be surprised how many investors jump right in without a plan. The USD/CAD is among the top 10 most traded currency pairs, meaning it has medium volatility. This can be scary and overwhelming, especially for a beginner. The solution is to plan ahead before opening a position. All successful traders do, as it helps them stay grounded in unexpected situations.
- Understand what drives the USD/CAD currency pair
A series of factors have the ability to impact the forex market, but each currency pair can react to additional factors, too. For example, Canada is the world’s largest oil exporter and occupies the second place in the world when it comes to oil reserves. If the oil prices rise, the Canadian dollar will follow, leading the USD/CAD quote to decrease.
- Apply a trading strategy that works in your advantage
Because of the market’s size, investors have the freedom to trade according to their needs and preferences. You’ll find hundreds and hundreds of strategies addressed to trading forex, but the secret to success is to pick the one that suits your trading style. You can backtest strategies with a demo account and virtual money until you find the one!
- Trade the Loonie at the right time
The forex market is open 24 hours a day, five days a week – however, in order to trade the Loonie in a profitable way, you need to do it during certain market sessions. The best time to open a position on this pair is when the American trading session is open, to be more specific, from08:00 to 17:00 EST.
The USD/CAD or the Loonie is a popular currency pair on the forex market and it can bring you great returns if you do trade it the right way. The 5 tips in this article will help you start with confidence and hopefully get the best results. Be patient and stay focused on your objectives!