The simple answer? Currencies.
In the foreign exchange (forex) market, what’s actually being traded is money itself—specifically, currency pairs. Unlike stock markets where you buy shares in companies, forex trading involves buying a currency and simultaneously selling another.
Think of buying a currency like investing in a country. When you buy the Japanese yen (JPY), you’re essentially betting that Japan’s economy is strong and will grow stronger. If your analysis is correct and the exchange rate moves in your favor, you earn a profit when you sell the currency back.
🧭 What Affects Currency Prices?
A currency’s value is a reflection of the market’s confidence in a country’s:
- Economic strength
- Political stability
- Interest rates
- Trade balances
- Central bank policy
This is why forex traders often follow macroeconomic data, central bank announcements, and geopolitical events.
💵 The Major Currencies in Forex
Although many currencies are available, the majority of trading volume is concentrated in just eight major currencies:
| Symbol | Country | Currency | Nickname |
|---|---|---|---|
| USD | United States | Dollar | Buck, Greenback |
| EUR | Eurozone | Euro | Fiber |
| JPY | Japan | Yen | Yen |
| GBP | United Kingdom | Pound | Cable |
| CHF | Switzerland | Franc | Swissy |
| CAD | Canada | Dollar | Loonie |
| AUD | Australia | Dollar | Aussie |
| NZD | New Zealand | Dollar | Kiwi |
These are called the “majors” because they are the most traded currencies in the world, representing the most stable and influential economies.
🧠 Fun Fact: The British pound (GBP) is the world’s oldest active currency, dating back to the 8th century!
🔡 What Do the 3-Letter Currency Codes Mean?
Each currency has a three-letter code, defined by the ISO 4217 standard:
- The first two letters represent the country
- The third letter represents the currency name
Example:
NZD = New Zealand Dollar
USD = United States Dollar
🧩 Forex Trading Pairs
Currencies are always traded in pairs, such as:
- EUR/USD
- USD/JPY
- GBP/CHF
You are always buying one currency and selling another. Traders speculate on whether the base currency (first in the pair) will strengthen or weaken against the quote currency (second in the pair).
🏆 Why Focus on Major Currencies?
- Highest liquidity = tighter spreads
- More predictable due to strong data sources
- Widely covered in news & analysis
New traders are advised to start with major currency pairs before exploring exotic or cross pairs.
🔗 Internal & External Links
- How Forex Trading Works (internal)
- Currency Trading for Beginners – Investopedia (external)