There are many official currencies that are used all over the world, but there only a handful of currencies that are traded actively in the forex market. In currency trading, only the most economically/politically stable and liquid currencies are demanded in sufficient quantities. For example, due to the size and strength of the United States economy, the American dollar is the world's most actively traded currency.
In general, the eight most traded currencies (in no specific order) are the U.S. dollar (USD), the Canadian dollar (CAD), the euro (EUR), the British pound (GBP), the Swiss franc (CHF), the New Zealand dollar (NZD), the Australian dollar (AUD) and the Japanese yen (JPY).
Currencies must be traded in pairs. Mathematically, there are 27 different currency pairs that can be derived from those eight currencies alone. However, there are about 18 currency pairs that are conventionally quoted by forex market makers as a result of their overall liquidity. These pairs are:
The total amount of currency trading involving these 18 pairs represents the majority of the trading volume in the FX market. This manageable number of choices makes trading a lot less complicated compared to dealing with equities, which has thousands of possible choices to choose from.
To learn more about forex, see The Forex Market, The Fundamentals Of Forex Fundamentals andA Primer On The Forex Market.
Understand how inflation can affect foreign exchange rates of a currency and how it is just one of many economic factors ...
Understand the meaning of arbitrage trading, and learn how traders employ software programs to detect arbitrage trade opportunities.
Understand the difference between the bid-ask spread that determines the buy or sell price for a stock and a bid-ask bounce, ...
Learn how to find your bank's bid-ask spreads for currency conversions, and understand why you should consider alternative ...
Spot and forward foreign exchange rates that are used as standard ...
The price of a nation’s currency in terms of another currency. ...
The percentage of open positions held for major currency pairs ...
A currency quotation in the foreign exchange markets that expresses ...
A series of sudden currency depreciations that nations may resort ...