Currency (Foreign Exchange) Markets

What are Currency (Foreign Exchange) Markets?

• The Currency Trading Market(Forex Market) is a huge (3.2 Trillion US dollar) market where world currencies are exchanged back and forth on a daily basis. Currency Trading means buying and selling currency on the foreign exchange (or "Forex") market with the objective to make money,  

• Currencies are the money of different countries, and currency trading is the buying and selling of these currencies. There are almost as many different currencies as there are countries, but the most popular currencies for trading are the US Dollar, the Euro, the British Pound (Sterling), and the Japanese Yen. 

• The currency markets are one of the most popular day trading markets, and they therefore have some of the highest volume (number of contracts) and liquidity. This high volume and liquidity makes the currency markets attractive to all types of traders, including individual day traders, trading firms, financial and non financial companies, banks, and governments. For example, in Europe the currency in circulation is called the Euro (EUR) and in the United States the currency in circulation is called the US Dollar (USD). An example of a Forex trade is to buy the Euro while simultaneously selling US Dollar.

• Currency markets are unique as they are not traded at exchanges, but are traded directly between traders instead. 

Who trades currencies?

• Currencies are traded by individual retail investors, financial and non-financial institutions , Banks & Governments and corporations doing business. Retail investors and banks trade to earn profits and corporations usually trade in the normal course of the international business process. trades are directly between two traders (or a trader and a Forex broker). This means that there could be several different exchange rates for the same currencies, depending upon factors such as the location of the traders, and the brokers being used.

• Forex markets trade the currencies directly (rather than trading contracts), and the minimum amount that can be traded is known as a 'LOT'. The size of a lot is dependent upon the Forex broker being used. This amount is usually margined, so individual traders borrow most of the lot size from their Forex broker instead.

Popular Currency Markets  

• EUR / USD - The Euro to US Dollar exchange rate    
• GBP / USD - The British Pound to US Dollar exchange rate
• USD / JPY - The US Dollar to Japanese Yen exchange rate
• CHF / USD - The Swiss Franc to US Dollar exchange rate
• EUR / GBP - The Euro to British Pound exchange rate
• AUD / USD - The Australian Dollar to US Dollar exchange rate
• CAD / USD - The Canadian Dollar to US Dollar exchange rate
• EUR / CHF - The Euro to Swiss Franc exchange rate

Thank You !