What is Forex and Forex Market?

Forex is a short way of saying Foreign Exchange and it is all about currencies and changing then from one countries currency to another one.

Most people would have come across exchanging one currency for another when holidaying overseas. We go to the foreign exchange counter at the airport (or our bank or travel agent before we leave, if we are more organised) and hand over our cash and get back some cash from the new country we are visiting.

The amount we get back is determined by the currency market and what the currencies are worth when compared to each other. If you are from the US and are visiting Australia, you will get more Australian dollars back than the amount of US dollars you hand over the counter. There are many factors built into how the amount is worked out and it is very complicated.

Online forex trading has been around since about 1996. It relies on trading currency pairs. Currency prices can only change when compared to another countries currency (as I explained in the airport example above) so therefore they are traded in pairs. The most common currency pairs are the EUR/USD (which is the price of US dollars quoted in euros) and the GBP/USD (which is the price of US dollars quoted in British pounds).

The Top 6 Most Traded Currencies

1. United States dollar (USD $)
2. Euro (EUR €)
3. Japanese yen (JPY ¥)
4. British pound sterling (GBP £)
5/6. Swiss franc CHF and Australian dollar (AUD $)