What Exactly Do People Trade When We Talk About Forex Trading?


April 7, 2021 | AtoZ Markets – Forex is a shorter term for the foreign exchange market. If this term is new to you, you should know that we trade money or currencies from one country to another in this trading. It may be a complex idea for some because a forex trader does not buy anything tangible. And when we say tangible, we are talking about the things that we can touch and are physically present. In this article, we will help enlighten some confusion.

More on this comparison

Let us compare this currency purchase to buying a particular share or stocks from a company. The value of this money reflects the market’s current and future status. For example, we can assume that a trader buys USD or US dollars. This can be compared to purchase stock shares from the US economy because the trader thinks that the USD is strong and it will be stronger in the coming years.

Now, this trader may also have the intention to sell this soon to earn more profits. It is getting more evident that the exchange rate of a particular currency over the others has a lot to say about other currencies and even their economy.

Naming all the major currencies

Now that we understand what we trade in forex with our given comparison let us directly jump to the following topic: the major currencies. We call them major currencies for a reason. They are the ones that forex traders, especially novice forex traders, use in their trades. It is why the trade volume and liquidity are very massive. These major currencies are primarily from countries with enormous economies. However, these major currencies are not fixed. They vary and depend from one trader to another.

USD, JPY, CHF, EUR, and GBP: are some of the major currencies. AUD, CAD, and NZD are also considered major currencies, but they are also known as commodity currencies.

These given symbols are representations of the countries’ currencies. Listed below is the legend of these symbols:

  • USD — US Dollar
  • JPY — Japanese Yen
  • CHF — Swiss Franc from Switzerland
  • EUR — Euros from Europe
  • GBP — Great Britain’s Pounds
  • AUD — Australian Dollars
  • CAD — Canadian Dollars
  • NZD — New Zealand Dollars

Tell me more about the major currencies

If you have noticed, currency symbols would always be limited to three letters only. If you encounter a term called ISO 4217 Currency Codes, this is also the same as the three digits we discuss. The International Organization for Standardization made it official to use these three letters symbols or codes for the currencies from 1973 until the present.

The two initial letters would focus on the country name, and the last letter refers to the first letter of that corresponding country. Let us take USD, for example. The letters “US” in the USD means the United States, and the letter D in USD means dollar, which is the US’s currency name.

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