Most industries have developed their unique slang language and Forex is no different in this regard. You’re probably familiar with animal names such as Bulls, Bears, Pigs, Sheep etc. given to certain traders. But slang doesn’t end there. Many currency pairs are given informal names too.
Cable definition
Cable is an informal name given to the U.S. dollar (USD) and the British pound sterling (GBP) currency pair (GBP/USD).
Why is understanding the Cable important for traders?
- Understanding informal language can make communication with the trading community easier and more fun.
- Cable or GBP/USD is one of the most actively traded currency pairs globally.
- Cable is a highly liquid currency pair and offers tight spreads.
Thorough Cable Explanation
Informally GBP/USD currency pair is known as cable. The term has a rich history and dates back to the mid-19th century. Around this period the exchange rate between the USD and GBP began to be transmitted across the Atlantic Ocean from London to New York and vice versa. Early telegraph cables were used for the communication.
Example of Cable in Forex
The British pound sterling (GBP) and the U.S. dollar (USD) are both referred to as major currencies. Major currencies are backed by strong economies and are more stable than minor and exotic ones. As a result, most traders invest in these currencies. The fact that GBP/USD is highly traded makes its spreads tight and very attractive.
Tight spreads are only one dimension when selecting a currency pair for investing. It’s best to test and backtest your trading strategies first to see if the trading asset is right for you. Often traders that are good at trading certain assets, fail to profitably trade the other and vice versa.
Before trading cable, keep in mind that GBP is highly correlated with Euro. And changes in the European economy will influence the cable. Europe and Great Britain are neighbors and they have strong economic ties with each other despite the fact that the UK is no longer a member of the EuroZone.
FAQs on Cable in Trading
What is the best time to trade cable?
It’s difficult to say as every trader is unique in his or her approach. Some traders prefer intraday trading while others take position and swing trades. The best time to trade Cable depends on your trading strategy.
Is it profitable to trade cable?
Depends on who you ask. Many traders consistently profit from trading the GBP/USD currency pair. Cable is highly liquid and offers tight spreads.
Why is the GBP/USD pair called cable?
Slang language is common among many sectors. The GBP/USD pair is given the name Cable thanks to its historic background. In the mid 19th century telegraph cables were used to transmit financial data between London and New York.