Cable definition

What is cable in forex?

Cable in forex is the nickname of the GBP/USD currency pair. It represents the British pound against the US dollar, and it is one of the most popular pairs on the currency market.

Why is GBP/USD referred to as cable?

GBP/USD is referred to as cable because of the deep-sea cables which used to carry buy and sell information between London and New York. This information is now exchanged through more sophisticated means – such as satellites and fibre optic cables – but the name continues to be used by forex traders.

How can you trade cable?

There are a few things to be aware of before you start trading cable.

First, you should consider when the best times to trade cable are. This will usually be when both the American and British forex markets are at their most liquid, as you are more likely to find someone to take the other side of your trade. This is generally from 2pm until 6pm (UK time).

It’s also important to know why traders might open a position on cable. Traders will go long on GBP/USD when GBP is predicted to strengthen against USD, which will cause the price of the currency pair to rise. They will go short on cable when USD is predicted strengthen against GBP, which will cause the price of this currency pair to fall.

There are three ways to trade cable: with CFDs, spread bets or via a broker.

Trading cable with CFDs

A contract for difference (CFD) enables you to take a position on cable’s price movements without owning any currency. You can go either long or short on the price of cable – depending on whether you think that the market will rise or fall. The profit or loss to a CFD position on cable is determined by the difference in the currency pair’s price from when you open the contract, to when you close it.

Trading cable with spread bets

Like CFDs, spread betting enables you to take a position on cable without ever owning any currency. You bet an amount of money per pip of movement in the currency pair, and the degree to which your prediction was correct determines your profit or loss. Just like CFDs, you can go long or short when spread betting.

Trading cable with a broker

Forex trading via a broker is similar to CFD trading and spread betting. This is because you’re speculating on the price movements of cable without taking ownership of the currencies.

If you think cable’s price is headed down – meaning that USD is appreciating relative to GBP – you can go short. If you think GBP will strengthen, you would go long and profit from the market rising.

Usually, you’ll pay a commission when dealing forex with a broker.

Find out more about trading forex