Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

FOREX BASICS

FOREX TRADING ACADEMY

What Is Forex?

Forex, also known as foreign exchange, FX or currency trading, is a decentralized global market where all the world's currencies trade. The forex market is the largest, most liquid market in the world with an average daily trading volume exceeding $5 trillion. All the world's combined stock markets don't even come close to this.

The largest stock market in the world, the New York Stock Exchange (NYSE), trades a volume of about $22.4 billion each day. That huge $5 trillion number covers the entire global foreign exchange market, BUT retail traders trade the spot market and that’s about $1.8 trillion.


What Is Traded in Forex?

The simple answer is MONEY.

Think of buying a currency as buying a share in a particular country, kinda like buying stocks of a company. The price of the currency is usually a direct reflection of the market’s opinion on the current and future health of its respective economy.

In forex trading, when you buy, say, the Japanese yen, you are basically buying a “share” in the Japanese economy. You are betting that the Japanese economy is doing well and will even get better as time goes. Once you sell those “shares” back to the market, hopefully, you will end up with a profit. In general, the exchange rate of a currency versus other currencies reflects the condition of that country’s economy, compared to other countries’ economies.


Major Currencies

While there are potentially lots of currencies you can trade, as a new trader, you will probably start trading with the “major currencies.”


SYMBOL

COUNTRY

CURRENCY

USD

United States

Dollar

EUR

Eurozone

Euro

JPY

Japan

Yen

GBP

Great Britain

Pound

CHF

Switzerland

Franc

CAD

Canada

Dollar

AUD

Australia

Dollar

NZD

New Zealand

Dollar



Currency symbols always have three letters, where the first two letters identify the name of the country and the third letter identifies the name of that country’s currency.

Take NZD for instance. NZ stands for New Zealand, while D stands for dollar. The currencies included in the chart above are called the “majors” because they are the most widely traded ones.



Buying and Selling Currency Pairs

When we buy a currency pair, it means that we are buying the Base Currency by selling the Quote Currency. Buying EUR/USD means that we are buying euro by selling USD.

When we sell a currency pair, it means that we are selling the Base Currency by buying the Quote Currency. Selling EUR/USD means that we are selling the euros to buy USD.


When you trade in the forex market, you buy or sell in currency pairs.

Major Currency Pairs



The currency pairs listed below are considered the “majors.” These pairs all contain the U.S. dollar (USD) on one side and are the most frequently traded.


CURRENCY PAIR

COUNTRIES

FX GEEK SPEAK

EUR/USD

Eurozone / United States

“euro dollar”

USD/JPY

United States / Japan

“dollar yen”

GBP/USD

United Kingdom / United States

“pound dollar”

USD/CHF

United States/ Switzerland

“dollar swissy”

USD/CAD

United States / Canada

“dollar loonie”

AUD/USD

Australia / United States

“aussie dollar”

NZD/USD

New Zealand / United States

“kiwi dollar”


Currency pairs that don’t contain the U.S. dollar (USD) are known as cross-currency pairs or simply as the “crosses.” Major crosses are also known as “minors.” The most actively traded minors are derived from the three major currencies: EUR, JPY, and GBP.


Euro Crosses


CURRENCY PAIR

COUNTRIES

FX GEEK SPEAK

EUR/CHF

Eurozone / Switzerland

“euro swissy”

EUR/GBP

Eurozone / United Kingdom

“euro pound”

EUR/CAD

Eurozone / Canada

“euro loonie”

EUR/AUD

Eurozone / Australia

“euro aussie”

EUR/NOK

Eurozone / Norway

“euro nockie”











Yen Crosses


CURRENCY PAIR

COUNTRIES

FX GEEK SPEAK

EUR/JPY

Eurozone / Japan

“euro yen” or “yuppy”

GBP/JPY

United Kingdom / Japan

“pound yen” or “guppy”

CHF/JPY

Switzerland / Japan

“swissy yen”

CAD/JPY

Canada / Japan

“loonie yen”

AUD/JPY

Australia / Japan

“aussie yen”

NZD/JPY

New Zealand / Japan

“kiwi yen”












Pound Crosses


CURRENCY PAIR

COUNTRIES

FXGEEK SPEAK

GBP/CHF

United Kingdom / Switzerland

“pound swissy”

GBP/AUD

United Kingdom / Australia

“pound aussie”

GBP/CAD

United Kingdom / Canada

“pound loonie”

GBP/NZD

United Kingdom / New Zealand

“pound kiwi”









Other Crosses


CURRENCY PAIR

COUNTRIES

FX GEEK SPEAK

AUD/CHF

Australia / Switzerland

“aussie swissy”

AUD/CAD

Australia / Canada

“aussie loonie”

AUD/NZD

Australia / New Zealand

“aussie kiwi”

CAD/CHF

Canada / Switzerland

“loonie swissy”

NZD/CHF

New Zealand / Switzerland

“kiwi swissy”

NZD/CAD

New Zealand / Canada

“kiwi loonie”













Exotic Currency Pairs

Exotic currency pairs are made up of one major currency paired with the currency of an emerging economy, such as Brazil, Mexico or Hungary. The chart below contains a few examples of exotic currency pairs. These pairs aren’t as heavily traded as the “majors” or “crosses,” so the transaction costs associated with trading these pairs are usually bigger.


CURRENCY PAIR

COUNTRIES

FXGEEK SPEAK

USD/HKD

United States / Hong Kong

USD/SGD

United States / Singapore

USD/ZAR

United States / South Africa

“dollar rand”

USD/THB

United States / Thailand

“dollar baht”

USD/MXN

United States / Mexico

“dollar mex”

USD/DKK

United States / Denmark

“dollar krone”

USD/SEK

United States / Sweden

“dollar stockie”

USD/NOK

United States / Norway

“dollar nockie”

It’s not unusual to see spreads that are two or three times bigger than that of EUR/USD or USD/JPY.


Commodities

For trading newbies out there, you should know that commodity prices can affect currency price action. In fact, commodity-related currencies like the Aussie, Loonie, and Kiwi often take cues from commodity prices trends.


COMMODITY

DESCRIPTION

USCOCOA

US COCOA

SOYBEAN

SOYBEAN

BRENT

BRENT OIL FUTURE

COPPER

COPPER FUTURE

USOIL

West Texas Intermediate Crude Oil Cash

UKCOCOA

UK COCOA


Indices

A stock index or stock market index is a measurement of a section of the stock market. It is computed from the prices of selected stocks. It is a tool used by investors and financial managers to describe the market, and to compare the return on specific investments.


INDICES

DESCRIPTION

FX GEEK SPEAK

DAX30

Deutscher Aktien Index

“DAX”

DJ30

Dow Jones Industrial Average

“Dow”

NASDAQ

National Association of Securities Dealers Automated Quotations

“NASDAQ”

S&P500

Standard & Poor 500

“S&P500”

Nikkei

Average Index of the Japanese stock market

“Nikkei”

FTSE

FTSE 100 or FTSE 250 depending on the number of companies included in the index

“Footsie”


Cryptocurrency pairs

If you trade cryptocurrencies, it’s not enough to pay attention to just BTC/USD (bitcoin).

By only trading bitcoin, you’re missing out on other potential trading opportunities.

You should also be monitoring other cryptocurrencies (also known as “altcoins”) as well.


CRYPTO PAIR

DESCRIPTION

BTC/USD

Bitcoin vs US Dollar

ETH/USD

Etherium vs US Dollar

LTC/USD

Litecoin vs US Dollar

NEO/USD

Neo vs US Dollar

DASH/USD

Dash vs US Dollar

XMRUSD

Monero vs US Dollar


*The information presented above is intended for informative and educational purposes, should not be considered as investment advice, or an offer or solicitation for a transaction in any financial instrument and thus should not be treated as such. Past performance is not a reliable indicator of future results.


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