FOREX Basics
"Forex" stands for foreign exchange; it's also known as FX. It is the buying and selling of currencies. Unlike stocks or futures, there's no centralized exchange for Forex. All transactions happen via phone or electronic network. Because of this, Forex is among the most liquid of trading instruments. In fact, the daily trading volume of currencies is $ 3.2 Trillion – which is more than all other world market exchange trading combined!
More than 85% of Forex trading volume occurs in the “Major” currencies: US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar.
In a Forex transaction, currencies trade in pairs. Therefore, a trader buys one currency while simultaneously selling its pair. That is, a trader exchanges the sold currency for the one being bought. So when a trader trades Euro-US Dollar (EUR/USD), the trader is actually exchanging the Euro for the US Dollar or vice versa. And when a trader trades US Dollar / Japanese Yen (USD/JPY), the trader is actually exchanging the US Dollars for Japanese Yen or vice versa.
The chart below displays some major and minor currency pairs and their associated trading terminology.
Symbol
Currency Pair
Trading Terminology
GBPUSD
British Pound / US Dollar
"Cable"
EURUSD
Euro / US Dollar
"Euro"
USDJPY
US Dollar / Japanese Yen
"Dollar Yen"
USDCHF
US Dollar / Swiss Franc
"Dollar Swiss", or "Swissy"
USDCAD
US Dollar / Canadian Dollar
"Dollar Canada"
AUDUSD
Australian Dollar / US Dollar
"Aussie Dollar"
EURGBP
Euro / British Pound
"Euro Sterling"
EURJPY
Euro / Japanese Yen
"Euro Yen"
EURCHF
Euro / Swiss Franc
"Euro Swiss"
GBPCHF
British Pound / Swiss Franc
"Sterling Swiss"
GBPJPY
British Pound / Japanese Yen
"Sterling Yen"
CHFJPY
Swiss Franc / Japanese Yen
"Swiss Yen"
NZDUSD
New Zealand Dollar / US Dollar
"New Zealand Dollar" or "Kiwi"
USDZAR
US Dollar / South African Rand
"Dollar Zar" or "South African Rand"
GLDUSD
Spot Gold
"Gold"
SLVUSD
Spot Silver
"Silver"
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