The majority of trading in forex is concentrated in the world's major financial centers, such as London, New York and Tokyo. In fact, in April 2016, sales desks in a mere five countries intermediated 77% of foreign exchange trading.

The currency market is also the only market that is open 24 hours a day with a high degree of liquidity throughout the day. For traders who may have a day job or just a busy schedule, it's a great market to start trading in. As you can see from the chart below, the major trading centers are spread throughout many different time zones, eliminating the need to wait for an opening or closing bell. As the U.S. trading closes, other markets in the east are opening, making it possible to trade at any time during the day.

 

Time Zone

Time (ET)

Tokyo Open

7:00 pm

Tokyo Close

4:00 am

London Open

3:00 am

London Close

12:00 pm

New York Open

8:00 am

New York Close

5:00 pm

 

 

 

Unlike the equities markets where there are thousands of assets to choose from, FX traders tend to focus on a handful of the most popular currency pairs known as the majors. More specifically, a major currency pair is generally comprised of the most frequently traded currencies from countries such as: Australia, Canada, Switzerland, Great Britain, Japan etc.

Generally speaking, a major currency pair refers to a popular currency that is then paired against the U.S. dollar. You may find it interesting to know that, according to the Bank For International Settlements, in April 2016, the U.S. dollar was on one side of 88% of all trades. In recent years there has also been a growing interest in trading currencies of various emerging markets. For example, the share of daily trades of the renminbi, the official name of the currency of China, doubled to 4% to become the world’s eighth most actively traded currency and the most actively traded emerging market currency, overtaking the Mexican peso.

Typically, a lot of the activity in the forex market is done by central banks, hedge fundsinstitutional investors and large corporations. But success in this market doesn't depend on how big you are - it depends on your dedication to learning the fundamentals, good judgment, hard work and some common sense. This section will introduce you to the major currencies in the forex market. 

Each forex transaction involves two different trades: the purchase of one currency and the sale of another. That is why forex quotes are quoted as a combination of two currencies, which is known as a currency pair. While there are many possible currency pairs, the most heavily followed and traded currencies are listed in the table below.

You may notice that the total market share adds to more than 100%, which is a result of currency pairs.

 

 

Currency

Market Share

USD

87.6%

EUR

31.4%

JPY

21.6%

GBP

12.8%

AUD

6.9%

CAD

5.1%

CHF

4.8%

CNY

4.0%

SEK

2.2%

Figure 1: The most heavily traded currencies and their market share

Source: BIS Triennial Survey, 2016

 

As mentioned above, the U.S. dollar (USD) is the most followed and traded currency in the world. For those getting started, it is a good idea to get to know one major currency pair and practice trading that currency pair alone before adding others. Later on in this tutorial we’ll examine the relationships between the U.S. dollar and many of its major currency counterparts, such as the euro and the yen to help you choose a currency pair so that you can start trading forex. (Learn the essence of currency exchanging in How do I convert dollars to pounds, euros to yen, or francs to dollars, etc.?)

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