Exchange rate

Currencies are traded in pairs and exchanged one against the other when traded, so the rate at which they are exchanged is called the exchange rate. The majority of the currencies are traded against the US dollar (USD). The four next-most traded currencies are the euro (EUR), the Japanese yen (JPY), the British pound sterling (GBP) and the Swiss franc (CHF). These five currencies make up the majority of the market and are called the major currencies or "the majors". Some sources also include the Australian dollar (AUD) within the group of major currencies.

Forex trading

The investor's goal in forex trading is to profit from foreign currency movements. Forex trading is always done in currency pairs. When trading currencies, trade only when you expect the currency you are buying to increase in value relative to the currency you are selling. If the currency you are buying does increase in value, you must sell back the other currency in order to lock in a profit. An open trade (also called an open position) is a trade in which a trader has bought or sold a particular currency pair and has not yet sold or bought back the equivalent amount to close the position. Private investors can trade in forex directly or indirectly through:
The spot market
Forwards and futures
Options
Contracts for difference
Spread betting It is estimated that anywhere from 70% to 90% of the forex market is speculative. In other words, the person or institution that bought or sold the currency has no plan to actually take delivery of the currency in the end; rather, they were solely speculating on the movement of that particular currency.

Introduction to Foreign Exchange Markets

The forex market is a non-stop cash market where currencies of nations are traded, typically via brokers. Foreign currencies are constantly and simultaneously bought and sold across local and global markets, hence investments appreciate or depreciate in value based upon currency movements. Foreign exchange market conditions can change at any time in response to real-time events. The main enticements of currency dealing to private investors and attractions for short-term forex trading are:
24-hour trading, 5 days a week with access to global forex dealers
An enormous liquid market making it easy to trade most currencies
Volatile markets offering profit opportunities
Standard instruments for controlling risk exposure
The ability to profit in rising or falling markets
Leveraged trading with low margin requirements
Many options for zero commission trading