FOREX Most Traded Currencies

Currencies are traded in dollar amounts called “lots”. One lot is equal to $1,000, which controls $100,000 in currency. This is what is known as the "margin". You can control $100,000 worth of currency for only 1,000 dollars. This is what is called “High Leverage”.

Currencies are always traded in pairs in the FOREX. The pairs have a unique notation that expresses what currencies are being traded. The symbol for a currency pair will always be in the form ABC/DEF. ABC/DEF is not a real currency pair, it is an example of a symbol for a currency pair. In this example ABC is the symbol for one countries currency and DEF is the symbol for another countries currency.

Here are some of the common symbols used in the Forex:

USD - The US Dollar

EUR - The currency of the European Union "EURO"

GBP - The British Pound

JPN - The Japanese Yen

CHF - The Swiss Franc

AUD - The Australian Dollar

CAD - The Canadian Dollar

There are symbols for other currencies as well, but these are the most commonly traded ones.

A currency can never be traded by itself. So you can not ever trade a EUR by itself. You always need to compare one currency with another currency to make a trade possible.

Foreign Exchange Market Types

Over-the-counter (OTC)
It is composed of commercials banks, investment banks, others financial institutions and corporations. Each bank has a separate forex trading room. They are surrounded by telephones and terminals displaying up-to-date information. Most of the forex activities take place in this market. This market caters to both wholesale and retail clients.

Exchange-Traded
Security exchanges trade in certain types of forex instruments such as futures and options. The dealing is done through stockbrokers.
Dealers can trade foreign currency through voice brokers, electronic brokerage services and directly with other dealers. Internet trading of forex is increasing. Many large newspapers quote exchange rates daily.

Foreign Exchange Market Terminology

Bid: The rate at which traders buy foreign exchange (buying rate).

Offer: The rate at which traders sell foreign exchange (selling rate).

Spread: The difference between bid and offer rates. It is profit margin.

American Terms (Direct quote): The number of dollars per unit of foreign currency.

European Terms: The number of units of foreign currency per unit of dollar.

Cross Rate: The relationship between two nondollar currencies.

Multiple Exchange Rate System: Different exchange rates for different types of transactions.

Arbitrage: Buying and selling of foreign currencies at a profit due to price discrepancies.

Speculators: Trader’s position in foreign exchange market for earning a profit.

Hard Currency: A fully convertible currency which is relatively strong and stable in value.

Convertible Currency: A currency that can be freely traded for other currencies.

Exotic Currency: Currency of developing country which is weak, unstable and unpredictable.

Foreign Exchange Rate: Price of a currency.

Discount: It exists when forward rate is less than spot rate.

Premium: It exists when forward rate is exceeds spot rate.

Black Market: Price of currency based on supply and demand conditions instead of government controls.