In forex, you buy and sell currencies (for example US dollar, Euro, Yen, Pound sterling), and you may even earn a profit, according to which currency pair you exchanged. This is why we call it the foreign exchange. Depending on the currency rates and market movements, you can make profits. It all depends on how alert you are and how economies change.
Because it’s all about money, let’s start with the basics. To make things simpler, in forex we use symbols. The most commonly traded currencies are listed below.
- US Dollar = USD (United States)
- Euro = EUR (Eurozone countries)
- Pound Sterling = GBP ( Great Britain)
- Japanese Yen = JPY (Japan)
- Swiss Franc = CHF (Switzerland)
- Canadian Dollar = CAD (Canada)
- Australian Dollar = AUD ( Australia)
Trading always consists of buying one currency and selling another. Together these currencies make up a currency pair.
Imagine choosing the USD/EUR pair. You expect the US dollar to increase in value as compared to the Euro. So you buy USD and sell EUR. Remember that in order to buy one currency you have to sell another. If the dollar rises against the euro, you close the position and make a profit.