What Is Traded In Forex?

What does FX trading entail？

MONEY is the simple answer. Currency is a good example.

Because you're not purchasing something tangible, forex trading might be perplexing, so we'll use a simple (but imperfect) comparison to illustrate it.

Consider purchasing a currency as purchasing a share in a certain country, similar to purchasing stock in a corporation.

The price of a currency is typically a direct result of the market's view of the economy's current and future health.

When you buy the Japanese yen in forex trading, you are essentially buying a “share” in the Japanese economy.

You're wagering that Japan's economy is performing well and will continue to improve over time.

Hopefully, you will make a profit when you sell those “shares” back to the market.

In general, a currency's exchange rate with other currencies reflects the state of that country's economy in comparison to other economies.

You'll be anxious to start working with currencies once you graduate from our School of Pipsology.

Major Currencies

While you may trade a wide range of currencies, as a beginner forex trader, you will most likely begin with the “main currencies.”

Because they are the most commonly traded currencies and symbolize some of the world's largest economies, they are referred to as “major currencies.”

What constitutes “major currencies” is a point of contention among forex traders.

Only the USD, EUR, JPY, GBP, and CHF are considered big currencies by the prickly ones who presumably received straight A's and obeyed all the rules as youngsters.

The AUD, NZD, and CAD are then referred to as “commodity currencies.”

To keep things easy for us rebels, we just refer to all eight currencies as “majors.”

We've listed them below by symbol, country of usage, currency name, and funny nicknames.

The first two letters of a currency sign always represent the country's name, while the third letter represents the currency's name, which is generally the first letter of the currency's name.

ISO 4217 Currency Codes are made up of three letters.

The three-letter designations for currencies that we use today were created by the International Organization for Standardization (ISO) in 1973.

Take the New Zealand dollar, for example...

The letters NZ and D stand for New Zealand and dollar, respectively.

Isn't that simple？

Because they are the most extensively traded, the currencies in the chart above are referred to as “majors.”

WERE YOU AWAREN'T？ The British pound, which dates back to the eighth century, is the world's oldest currency currently in use. The South Sudanese pound, which became official on July 18, 2011, is the world's newest currency.

We'd also want to point out that “buck” isn't the sole moniker for the US dollar.

Greenbacks, bones, Benjamins, cheddar, paper, loot, scrilla, cheese, bread, moolah, dead presidents, and cash money are among the other items.

So, if you wanted to say, “I have to go to work immediately,” that's what you'd say.

“Yo, I must bounce!” you may say instead. It's up to you, son, to make them Benjis!

INTERESTING FACT: Dodo, a pet name for Jorge (George in Spanish), is a nickname for the US dollar in Peru. Is this a reference to the picture of George Washington on the $1 note？

They call me Dodo yo!