If you’re relatively new to forex trading, you might have heard people talk about “trading cable” and wonder what that means. We’re here to enlighten you and not only explain what cable is in the context of Forex, but also why it’s so important.
So, let’s get started.
What is cable in forex?
Cable is a slang term used to describe the GBP/USD currency pair. The name originates from the telegram cables that lie under the Atlantic Ocean, connecting the UK and the US. When these cables were first laid, connecting London to New York, they were the primary means of sharing currency quotas and other forex-related data.
So, the term cable stuck in relation to this specific currency pair – and it’s always used to describe this pair. It is never applied to other currency combinations.
What does cable up and cable down mean?
This is important if you’re listening to trading advice from others so you understand which way the currencies in the pair are moving!
When someone says “cable is down” they are referring to the performance of the British pound against the US dollar. So, if cable is falling, that means the US dollar is rising in value compared to the British pound.
Therefore, if “cable is up” or rising, that means the British pound is rising in value against the US dollar.
At the time of the mini-budget from Liz Truss’s conservative government in 2022, cable fell significantly – so the pound lost value against the dollar. In fact, it hit an all-time low in the wake of this announcement, although cable has risen since then.
Why is cable such a popular currency pair?
Cable is one of the most popular pairs for forex traders because it is highly liquid and very widely traded. That means there are frequent fluctuations in its price, which can allow forex traders to make good returns – if they bet the right way.
It is also the third most widely traded currency pair traded on forex markets after the euro and US dollar, which is the most traded pair, and the US dollar and Japanese yen, which sits in the number two position.
Given the economic importance of both the UK and US economies on the world stage, it is little surprise that this currency pair is so popular. Its historical nature also helps as it is a well-established currency pair allowing traders to look at a great deal of data from previous years to help inform their trading decisions.
What influences the value of cable?
As we saw with the impact that the Liz Truss budget had on the value of GBP in the cable pair, political decisions can have an effect on the value of cable. But this is not the only influence that has an impact that traders need to be aware of.
Central bank decisions – in this case either from the Bank of England or the Federal Reserve – can also affect the value of cable. The economic outlook for both countries can also push cable up or down, as can data around the gross domestic product (GDP) of either nation, unemployment figures and inflation.
The US-UK trade balance also has an effect, which is why this is such a dynamic currency pairing and one that experiences so much movement in both directions. This also means that you need to pay attention to various sources of news to help you predict the direction of cable at any given time.
How can I trade cable?
There are several ways in which you can trade cable on forex markets, including through a broker, with contracts for difference (CFDs) and through spread betting.
In all of these types of trading, you will take a position (or make a “bet”) on whether one currency will rise or fall against the other without ever actually buying or selling US dollars or British pounds.
Although this minimises the risk in some respects, it’s important to remember that forex trading is leveraged, which means that you could lose more than you initially “bet” on a trade. However, the upside is that this means you can gain substantially more with less capital, which is why it’s such a popular way to trade forex.
How will I know I’m ready to trade cable?
When you think of it in this way, and given all of the factors that can affect the value of cable, it might feel more daunting than you thought to start trading. However, there are ways in which you can build your skills and knowledge as a forex trader without having to risk any money.
Our one step evaluation program will help you trade with confidence. Rather than diving straight in, you can undergo a test to prove your forex trading skills before being fully funded. As a one step evaluation prop firm, we require you to achieve a ten per cent profit target and demonstrate disciplined risk management.
When you can do that, you can become a fully funded forex trader at a rate that suits you.
However, if you still feel like you need more time, our two step program could be more suitable. This will help you to hone your skills and develop consistency within your forex trading activity before you become fully traded.
Similar to our one step program, we require you to hit certain milestones with your trades. In this instance, that’s a ten per cent profit with a ten per cent static drawdown. In phase two, we’ll expect you to hit a five per cent profit within the same risk parameters.
We’re so confident that this will help you become a balanced forex trader that we’ll refund your evaluation fee as part of your first level two payout.
So, there are many ways in which to start trading cable and getting into the forex market, whether you’re ready to go straight for instant funding or whether you want to take your trading a little slower to learn the ropes and get your head around how this currency pair moves.