Have you ever wanted to trade one of the most popular trading pairs, such as GBP CAD? Are you interested in learning and applying as many GBPCAD tips and tricks as possible that will be worth their weight in actual gold at the forex exchange market?
If you are one of these enthusiasts and want to learn everything about these currencies and their trading, you are in the right place! As you probably know by now, Forex trading represents selling one currency and buying another on the Forex market simultaneously. One serious trader can profit if the currency he buys moves against the currency he’s sold.
That’s precisely how traders trade GBP to CAD on one of the world’s largest and most liquid financial, decentralized markets. The foreign exchange market is OTC or the global marketplace that determines the exact exchange rate for foreign currencies worldwide.
However, in order to understand the GBPCAD trading tips, let’s get to know each currency first, shall we?
GBP – Get to know the basics of the British pound
The British pound, also known by its names “pound” or “sterling,” represents the official currency of the following countries: the United Kingdom, the Isle of Man, Gibraltar, Jersey, Guernsey, the South Sandwich Islands, the British Antarctic Territory, South Georgia, Tristan da Cunha. The official symbol is GBP, while the ISO code is the GBP.
The British pound is the oldest currency used till now. The first banknotes were issued over 300 years ago.
The currency is known to be the oldest currency in continuous use, and it’s subdivided into 100 pence, which is known to be the plural of “penny.” GBP is the fourth most-traded currency globally after the US dollar, euro, and Japanese Yen. However, some nations on the planet are not using sterling. Instead of that, they are using currencies called pounds.
Together with all the currencies mentioned above, alongside the Chinese yuan, GBP forms the basket of currencies responsible for calculating the value of IMF special drawing rights. It is interesting to note that as of mid-2021, GBP happens to be the fifth most-held reserve currency when it comes to global reserves.
A brief history of the Pound sterling
The Bank of England issued the pound banknotes more than 300 years ago. The pound coin was first spotted in 1489, under the rule of Henry VII. In 1694, pound notes started to circulate right after the establishment of the famous Bank of England. Keep in mind that the notes were all handwritten.
In 1971, the decimal system became introduced. That same year the UK allowed the British pound to float freely among other currencies. The decision was a result of market factors deciding the value of the currency rather than artificial pegs. In 1990, the UK considered attaching the value of the British pound to the Deutsche mark. However, this notion was soon discarded.
Right after the euro became the shared currency among the most member states of the EU in 2002, the UK opted not to follow it. Instead, the United Kingdom retained GBP as its national currency.
For GBPCAD trading tips, it’s also essential to know what the CAD exactly represents.
CAD – Meet all the basics of the Canadian dollar
CAD is the ISO code of the Canadian dollar, which symbol is the dollar sign $. In some cases, symbols are CA$, Can$, or C$ to distinguish them from numerous other dollar-denominated currencies. The Canadian dollar happens to be the official currency of Canada, divided into 100 cents.
Let’s take into consideration 2% of all global reserves. We can say that the Canadian dollar represents the fifth-most held reserve currency on the planet, right after the US dollar, the euro, the yen, and the pound sterling.
Canadian Dollar (CAD) is largely supported by the gold reserves of the Canadian central bank.
In order to find all the essential GBPCAD trading tips and how to trade the pound to the Canadian dollar, it is also necessary to keep in mind all the reasons why the Canadian dollar gets so much attention and popularity with central banks. These are the main reasons:
Canadian government’s strong sovereign position
Canada’s relative economic soundness
The stability of the Canadian’s political and legal systems.
A brief history of the Canadian dollar in the 20th century
During the First World War, the gold standard was temporarily abandoned and abolished on April 10, 1993. Right at the Second World War outbreak, here is what the fixed exchange rate looked like: CA$1.10= US$!.00. In 1945, this was changed to parity.
Three years later, the pound sterling devalued, and Canada followed with its dollar. The situation in 1949 was CA$1.10 = US$1.00. Nonetheless, Canada has managed to allow CAD to float in 1950, at which point the currency managed to rise to a premium over the US dollar in the next ten years.
However, CAD fell sharply in 1960, managing to peg two years later at CA$1.00= US$0.925. The peg lasted until 1970, with the currency’s value being floated since then.
How to trade GBP to CAD
Here are the essential GBPCAD trading tips. Any individual trader is able to trade pound to Canadian dollar (GBP/CAD), pairing with either a usual Forex contract or selling a contract for difference (CFD) on a specific currency pair and speculate on the price difference.
A CFD represents a financial instrument for beginner traders who are still unaware of it, typically between a Forex broker and an investor. In this scenario, one party agrees to pay the other the value difference between the start and end of each trade.
It’s essential to know that you can either speculate that the price will go up and hold a long position or suppose that it will fall and go for the short position. It’s all up to you.
For example, if you want to trade the GBP/CAD currency pair with CFDs, you will be required to speculate on the direction of the value of British pounds to Canadian dollars. If you’re convinced that the British pound will rise, it’s best to take a long position and buy the CFDs.
On the other hand, if you think that the pound will lose value versus the CAD, you’ll need to take a short position and sell CFDs.
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