What is Forex Trading?

Currency trading or Forex trading is the simultaneous buying of one currency and selling of another.

What is Foreign Exchange (Forex or FX) Trading?

Currencies are quoted in pairs, for example, Euro/US dollar, and investors can speculate on changes in the relative prices between the currencies. When one currency in the pair increases in value, it strengthens against the other. Currency trading is a popular way to trade on financial markets as it is a true 24-hour market. Foreign exchange trading opens at 9pm on Sunday evenings and trades continuously through until 10pm on Friday evenings (GMT).

With currency pairs, the buy price is quite often referred to as the base currency and the sell price is referred to as the quote currency. In any price quote, the figure tells you how much you would receive of the quote currency for one unit of the base currency.

For example, a quotation of EUR/USD 1.36568 means that one Euro is exchanged for 1.36568 US dollars.

Image representing Forex trading
The top 5 most traded currencies:
Image representing top 5 traded currencies

1) US Dollar (USD)
2) Euro (EUR)
3) Japanese Yen (JPY)
4) British Pound (GBP)
5) Swiss Franc (CHF)

To view the full list, please click here.

FX Nicknames
Many of the main Forex pairs have nicknames that traders use when discussing quotes. Some of the better known ones in currency trading are:
EUR/USD = Euro
GBP/USD = Cable (from the transatlantic cables that linked traders in the US and UK)
USD/JPY = Yen
USD/CHF = Swissie
USD/CAD = Loonie (from the nickname for the Canadian $1.00 coin)
AUD/USD = Aussie
NZD/USD = Kiwi