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Forex Trading Currencies
Forex trading is all about buying and selling currencies. Currency pairs are traded on where one currency is bought while the other is used to pay for it. The currency being bought is referred to as the "base currency" or "target currency" and the one being used to finance the transaction is known as the "quote currency", "counter currency" or just "currency", e.g. When the forex trade made is one where Euros are bought and U.S dollars (USD) are used to pay for them in the currency pair is Euro/USD, the USD is the quote currency and the Euro is the base currency.
How much one unit of the base currency costs in terms of the quote currency is known as the "exchange rate". If one Euro is worth 1.1648 USD then the Euro/USD exchange rate is 1.1648, since in this case, every USD is worth 0.8585 EU the USD/EU exchange rate is 0.8585.
There are over 300 different currencies used around the globe when the vast majority of them can be bought and sold. The number of possible forex pairs is therefore very large (around 100,000 possible currency pairs). Naturally, many currencies are esoteric and very rarely traded on, most online trading platforms offer forex traders the opportunity to trade on 12-15 currency pairs widely accepted as the ones made up of major currencies. All forex traders should acquaint themselves with the major currencies traded in the forex market, we've gathered for you some useful information which will help you do just that.
Major Currencies Responsible for Over 80% of Forex Trading
Below is a list of currencies which together are responsible for the bulk of trading in the forex market, one in which over three billion USD worth of funds exchange hands every single day.
- The U.S dollar (USD). The currency used in the United States of America. It is so commonly traded that any currency in which it does not play a part is commonly referred to as a "cross pair".
- The Euro (EU). The currency used in countries belonging to the European Union. The EU is the second most traded currency in the forex market. The EU/USD and USD/EU currency pairs are the ones most commonly traded.
- The Swiss franc (CHF (. The Swiss economy is and has been considered for centuries to be one of the world's most solid ones. It is therefore not surprising that the CHF is among the forex market's major currencies.
- The Japanese Yen (JPY). Japan's economy has far greater global influence than what this country's size may suggest, it is therefore not surprising that the yen is very attractive currency.
- The British Pound (GBP). In a referendum held in Great Brittan in June 2016 the British people voted to leave the European Union and so today this country's commitment to the EU block is somewhat ambiguous, both the EU and the British pound are used in Great Brittan and the GBP is, in its own right, one of the major currencies on the forex market.
- The Australian dollar (AUS). Trading the AUS offers forex traders a great opportunity for profit.
- The Canadian dollar (CAD). This currency is as solid as the USD.
- The New Zealand dollar. Although less commonly traded this currency enjoys a similar status to the AUS.
- The Chinese Yuan (CNY). China is home to one of the world's most booming economies, this makes the CNY a currency many forex traders follow and trade on regularly.
- Other currencies such as the South African Rand (ZAR), the South Korean won (KRW), the Brazilian real (BRL) and the Mexican peso (MXN).