Popular Forex Currencies
  1. Forex Currencies: Introduction
  2. Forex Currencies: Trading Strategies
  3. Forex Currencies: Ways To Trade
  4. Forex Currencies: The Four Major Pairs
  5. Forex Currencies: The EUR/USD
  6. Forex Currencies: The USD/JPY
  7. Forex Currencies: The GBP/USD
  8. Forex Currencies: The USD/CHF
  9. Forex Currencies: Commodity Pairs (USD/CAD, USD/AUD, USD/NZD)
  10. Forex Currencies: Currency Cross Rates
  11. Forex Currencies: Emerging Market Currencies
  12. Forex Currencies: Conclusion

Forex Currencies: Introduction

By Brian Perry

The currency markets are the largest and most actively traded financial markets in the world with a daily trading volume of more than $3 trillion (Triennial Central Bank Survey 2007). The majority of this trading is concentrated in the world's major financial centers such as London, New York and Tokyo. Large institutional investors such as banks, multinational corporations, hedge funds and central banks constitute the majority of the market activity. To knowledgeably compete in this overwhelmingly institutional marketplace, individual investors need to assimilate as much information as possible. This tutorial provides an overview of basic foreign currency (forex/FX) trading strategies, the markets for those strategies, and an examination of some of the most popular currencies traded.

Each transaction in the currency market involves two different trades: the sale of one currency and the purchase of another. The two currencies involved in the trade are known as a pair. While it is possible to swap virtually any currency for another, the majority of trading occurs among a handful of popular currency pairs.

Currency Market Share
USD 83.7%
EUR 60%
GBP 15.3%
JPY 13.4%
CHF 9.5%
SEK 2.2%
AUD 2.1%
CAD 1.6%
Figure 1: The most heavily traded currencies and their market share
Source: BIS Triennial Survey, 2004

The chart shows the most heavily traded currencies and their market share. Total market share adds up to 200% because each transaction involves two currencies (ECB: BIS Triennial Survey 2004).

As the world's reserve currency, the U.S. dollar is the most actively traded currency, and pairs involving the dollar make up the majority of transactions. Therefore, this tutorial examines the trading relationships between the U.S. dollar and several of its chief counterparts, including the euro, the Japanese yen, the British pound, and the Swiss franc. The tutorial also examines other popular trading pairs involving the U.S. dollar and the commodity currencies – those of Canada, Australia, and New Zealand.

Although the average trader will likely participate only in trades involving the U.S. dollar, this tutorial includes a discussion of cross rate pairspairs of significant international currencies that are not the U.S. dollar. Additionally, because emerging markets form an important part of the global financial system, this tutorial also examines the unique challenges facing individuals interested in trading emerging market currencies.(For more information, read The Foreign Exchange Interbank Market.)

Before the discussion of popular trading pairs, a brief analysis describes some of the instruments, concepts and strategies that should be familiar to investors trading in the currency markets.
Forex Currencies: Trading Strategies

  1. Forex Currencies: Introduction
  2. Forex Currencies: Trading Strategies
  3. Forex Currencies: Ways To Trade
  4. Forex Currencies: The Four Major Pairs
  5. Forex Currencies: The EUR/USD
  6. Forex Currencies: The USD/JPY
  7. Forex Currencies: The GBP/USD
  8. Forex Currencies: The USD/CHF
  9. Forex Currencies: Commodity Pairs (USD/CAD, USD/AUD, USD/NZD)
  10. Forex Currencies: Currency Cross Rates
  11. Forex Currencies: Emerging Market Currencies
  12. Forex Currencies: Conclusion
RELATED TERMS
  1. Base Currency

    The first currency quoted in a currency pair on forex. It is ...
  2. Currency Pair

    The quotation and pricing structure of the currencies traded ...
  3. Quote Currency

    The second currency quoted in a currency pair in forex. In a ...
  4. Funding Currency

    The currency being exchanged in a currency carry trade. A funding ...
  5. Counter Currency

    The currency used as the reference or second currency in a currency ...
  6. Currency Appreciation

    An increase in the value of one currency in terms of another. ...
RELATED FAQS
  1. How do you make money trading money?

    Investors can trade almost any currency in the world. Investors, as individuals, countries, and corporations, may trade in ... Read Answer >>
  2. What are the most common currency pairs traded in the forex market?

    There are many official currencies that are used all over the world, but there only a handful of currencies that are traded ... Read Answer >>
  3. How is spread calculated when trading in the forex market?

    First, remember that in the forex markets investors trade one currency for another. Therefore, currencies are quoted in terms ... Read Answer >>
  4. How can I trade in cross currency pairs if my forex account is denominated in U.S. ...

    The forex market allows individuals to trade on nearly all of the currencies in the world. However, most of the trading is ... Read Answer >>
  5. Can I trade a currency when its main market is closed?

    In the forex market, currencies from all over the world can be traded at all times of the day. The forex market is very liquid, ... Read Answer >>
  6. Why is the U.S. dollar shown on the top of some currency pairs and on the bottom ...

    All currencies are traded in pairs. The first currency in the pair is called the base currency while the second is called ... Read Answer >>

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