❂What is forex trading? | ☞ what is forex trading and how does it work

❁What is forex trading and how does it work | what is an fx trader | what exactly is forex trading | what is forex trading for beginners | ✔what do you trade in forex

Of course, money. Specifically, the currencies of different countries.

Anyone having a basic knowledge of the Forex market (FX) can give this answer.

However, in the Forex market (FX), you are not allowed to purchase anything physically. Hence, the FX market is a bit confusing for beginners. But, I’m here to help you out! We will use a simple formula to illustrate the FX market.

For example, just think that purchasing a currency is just like purchasing a share in a particular country or a company.

The currency rate is almost a direct reflection of the market’s sentiment and also basically depends on the present and future health of a particular currency’s respective economy.

In FX trading, for example, if you purchase the American dollar, you are basically purchasing a share in the American economy.

For instance, if the American economy does well, then you are in profit.

Then, you can sell all the American currencies or shares in your FX account and you will end up with a profit.

In a simplified way, the exchange rate of one currency versus the other currencies is a direct reflection of how a particular country is performing economically and financially.

☀ The major currencies are:

A Forex trader can potentially trade many currencies in the market, but as a beginner, you can start trading with the major currencies.

☑ What are these major currencies?

The American Dollar (USD)

EUR (Euro)

JPY (Japanese Yen).

GBP stands for Great Britain Pound.

Switzerland Dollar (CHF)

The Australian Dollar (AUD)

The New Zealand Dollar (NZD)

Canadian Dollar (CAD)

The above ones are referred to as major currencies because they are massively traded currencies and constitute some of the world’s largest economies.

Forex traders use different definitions for the "major currencies."

The cautious ones, who perhaps got straight A’s and pursued all the rules, consider USD, EUR, JPY, GBP, and CHF as "Major currencies."

While the other pairs—AUD, NZD, and CAD—are considered as "commodity currencies."

For us, to keep things simple, we consider all the eight currencies as "Major Currencies."

Below, you can check our list where I mentioned the currency symbol, the country they’re used in, the currency name, and the cool nicknames.

CODE	COUNTRY	CURRENCY	NICKNAME
USD	United States	Dollar	Buck
EUR	Euro Zone	Euro	Fiber
JPY	Japan	Yen	Yen
GBP	Great Britain	Pound	Cable
CHF	Switzerland	Franc	Swissy
CAD	Canada	Dollar	Loonie
AUD	Australia	Dollar	Aussie
NZD	New Zealand	Dollar	Kiwi

Did you observe? Currency symbols always have only three letters. Wondering why? I will explain to you:

Did you notice the three letters in any of the currency symbols?

For instance, take Australia’s currency symbol; it stands as AUD.

Here in the AUD currency, the first two letters represent the country name of that particular currency. Here, AU means Australia, and the third symbol, D, represents the currency name of Australia. D stands for Dollar, which is usually the currency's first name. On a whole, AUD stands for Australian Dollar.

These three letters of any country’s currency (i.e., AUD/NZD) are called ISO 4217 Currency Codes.

In the year 1973, the International Organization for Standardization (ISO) officially fixed the three-letter codes for the currencies we use today.

For instance, if you take CHF

In CHF, CH stands for Switzerland (country name) and F stands for Franc (the currency name of Switzerland).

It’s easy, right?

The currencies which are mentioned in the above chart are referred to as "majors" because they are heavily traded in majority countries.

I would also like to mention that "Buck" is not only the nick name for the American Dollar(USD).

There are other nicknames too: greenbacks, bones, benjis, Benjamins, cheddar, paper, loot, scrilla, cheese, bread, moolah, dead presidents, and cash money.