Simply put, when you trade forex, you are buying one currency and selling another.
This always happens simultaneously, when you buy one, you are immediately selling another. This is the reason why currencies are always quoted in pairs.
Here are the top 5 forex currency pairs based on their trading volume:
- Euro/Dollar (EUR/ USD)
- Dollar/Japanese Yen (USD/ JPY)
- British Pound Sterling/US Dollar (GBP/ USD)
- US Dollar/Swiss Franc (USD/ CHF)
- Australian Dollar/US Dollar (AUD/ USD)
Currency pairs will always rise and fall against each other for a varying number of reasons.
For example, if there is a particular political turmoil in one country, then the value of their currency may plummet – think GBP after Brexit was announced.
Forex produces price fluctuations each and every day in a wide number of currency pairs. These price movements are usually caused due to either fundamental or technical reasons, but we will go into these in much detail later on in the course.
It is these fluctuations that give traders opportunities to make a profit by correctly forecasting the direction that the price changes will move in.
What do you need to trade forex?
The beauty of the forex markets is that anybody can trade them. All you need is an internet connection, a device and enough cash to open up an account (this depends on the website or broker that you decide to use).
You can register a trading account with as little as $10 in most cases. However, as with anything, the more you put in the more you get out.