What Is the Meaning of Currency Exchange?
Currency trading goes by multiple names, including Forex, foreign exchange and the FX market. It’s where buyers and sellers come together to exchange currency of the nations of the world. And with an estimated $4 trillion traded daily, Forex is the largest, most liquid market on the planet.
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Forex in Action
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In the FX market, currency is bought and sold in pairs, so one currency is valued against another. An example of this would be the euro and the dollar, which is represented by the symbol EUR/USD.
When traders buy the euro, they are also selling the dollar at the same time.
Forex Hours of Operation
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Forex consists of four major markets around the world: London, New York, Tokyo and Sydney. Because each market has a different time zone, currency can be traded 24 hours a day, five days a week.
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Trading World Currency
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Some of the more popular currencies being traded in the FX market as of 2010 are: dollar (USD), euro (EUR), pound (GBP), yen (JPY), Canadian dollar (CAD), Australian dollar (AUD), and franc (CHF).
Forex Currency Pairs
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While many currency mixtures exist, the six most commonly traded pairs as of 2010 are: EUR/USD, GBP/USD, USD/CHF, USD/JPY, USD/CAD and AUD/USD.
Understanding Price
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Each currency pair has a price (also known as the exchange rate) that fluctuates by gaining or losing “pips.” For example, if the EUR/USD is 1.2600 and moves to 1.2601, it has risen one pip. Traders make money by predicting the pip movement of currency pairs.
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