Symbol	Currency
USD	United States Dollar
EUR	Euro
JPY	Japanese Yen
GBP	Pound (Sterling)
CHF	Swiss Franc
CAD	Canadian Dollar
AUD	Australian Dollar
NZD	New Zealand Dollar

Forex = Foreign Exchange market, sometimes shortened to FX

Not so long ago (the mid 1990’s) you needed capital to get into this game – serious capital, of the order of $10,000,000 and so it was banks, investment funds etc that had the field to themselves. Then the internet arrived, and with it came ‘retail’ forex – traders operating accounts of $1,000- $100,000 – us, the smaller guys and gals.

And what we’ll be discussing here is the spot forex market – trading that has a time limit of 2 working days, ie. not futures (although there are ways of trading through this time limit in practice).

The eight most frequently traded currencies are known as the major currencies. All others, perhaps unfairly, are the minor currencies.

Q. Why do currencies go up and down in value against each other?
A. A strong economy should make for a higher value currency and vice-versa.

A currency’s value reflects the market opinion as to the current and future position of the economy of the country associated with that currency. (The euro is the currency adopted by 15 European countries, at present – these countries are grouped together as the Eurozone – or even Euroland, which always sounds a bit silly).

So – bad economic news, as a forecast or actually arriving, would likely cause that currency’s value to drop. Good news – currency value goes up.

There are other, more minor, factors involved: central bank intervention, differences in interest rates between currencies, but the fundamental factor is the economies of various countries around the world.

One point to notice – there’s no supply and demand here. Price doesn’t go up because of the lack of a currency in the marketplace, certainly not with any of the major currencies. In the forex market, there’ll always be liquidity to spare.

TimeZones

The forex market is open 24 hours a day – and then stops suddenly for the weekend every Friday late afternoon, NewYork time.
Around the world, each major market has its opening and closing times – and the markets merge into each other…

(A small point to remember – Daylight Saving Times aren’t always perfectly synchronized around the world)

The opening and closing of each market does play some part in trading strategy, but perhaps not as much as one might think – we’ll discuss this in more detail later on.

For now, let’s move on to 2. Pairs and Pips →