Introduction to Forex: lesson 2
WHAT IS TRADED IN FOREX?
The simple answer is MONEY
Because you’re not buying anything physical, forex trading can be confusing.
Think of buying a currency as buying a share in a particular country, kinda like buying stocks of a company. Some of us here did economics it are doing economics. We know what's stocks or shares are.
The price of the currency is usually a direct reflection of the market’s opinion on the current and future health of its respective economy. In forex trading, when you buy, say, the Japanese yen, you are basically buying a “share” in the Japanese economy.
You are betting that the Japanese economy is doing well, and will even get better as time goes. Once you sell those “shares” back to the market, hopefully, you will end up with a profit.
In general, the exchange rate of a currency versus other currencies is a reflection of the condition of that country’s economy, compared to other countries’ economies.
By the time you finish from here, you’ll be eager to start working with currencies. Major Currencies While there are potentially lots of currencies you can trade, as a new trader, you will probably start trading with the “major currencies.”
SYMBOL COUNTRY CURRENCY NICKNAME
USD United States Dollar (Buck) EUR Eurozone Euro (Fiber) JPY Japan Yen (Yen) GBP Great Britain Pound (Cable) CHF Switzerland Franc kSwissy) CAD Canada Dollar (Loonie) AUD Australia Dollar (Aussie) NZD New Zealand Dollar (Kiwi)
Currency symbols always have three letters, where the first two letters identify the name of the country and the third letter identifies the name of that country’s currency.
Take NZD for instance. NZ stands for New Zealand, while D stands for dollar. Easy enough, right?
The currencies included in the chart above are called the “majors” because they are the most widely traded ones.