0 Explain Traded

 The simple answer is MONEY. Because you're not buying anything physical, this kind of trading can be confusing.
Think of buying a currency as buying a share in a particular country, kinda like buying stocks of a company. The price of the currency is a direct reflection of what the market thinks about the current and future health of the Japanese economy.
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.
Major Currencies


Major Currencies

Symbol	Country	Currency	Nickname
USD	United States	Dollar	Buck
EUR	Euro zone members	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

 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. We'd also like to let you know that "buck" isn't the only nickname for USD.

0 Forex Definition

If you've ever traveled to another country, you usually had to find a currency exchange booth at the airport, and then exchange the money you have in your wallet or purse or man purse into the currency of the country you are visiting.

You go up to the counter and notice a screen displaying different exchange rates for different currencies. You find "Japanese yen" and think to yourself, "WOW! My one dollar is worth 100 yen?! And I have ten dollars! I'm going to be rich!!!" (This excitement is quickly killed when you stop by a shop in the airport afterwards to buy a can of soda and, all of a sudden, half your money is gone.)

When you do this, you've essentially participated in the forex market! You've exchanged one currency for another. Or in forex trading terms, assuming you're an American visiting Japan, you've sold dollars and bought yen.

Before you fly back home, you stop by the currency exchange booth to exchange the yen that you miraculously have left over (Tokyo is expensive!) and notice the exchange rates have changed. It's these changes in the exchanges rates that allow you to make money in the foreign exchange market.

The foreign exchange market, which is usually known as "forex" or "FX," is the largest financial market in the world. Compared to the measly $153 billion a day volume of the New York Stock Exchange, the foreign exchange market looks absolutely ginormous with its $4 TRILLION a day trade volume. Forex rocks our socks!

Let's take a moment to put this into perspective using monsters...

The largest stock market in the world, the New York Stock Exchange (NYSE), trades a volume of about $74 billion each day. If we used a monster to represent NYSE, it would look like this...

You hear about the NYSE in the news every day... on CNBC... on Bloomberg...on BBC... heck, you even probably hear about it at your local gym. "The NYSE is up today, blah, blah". When people talk about the "market", they usually mean the stock market. So the NYSE sounds big, it's loud and likes to make a lot of noise.

But if you actually compare it to the foreign exchange market, it would look like this... Oooh, the NYSE looks so puny compared to forex! It doesn't stand a chance!

Check out the graph of the average daily trading volume for the forex market, New York Stock Exchange, London Stock Exchange, and Shanghai Stock Exchange:

The currency market is over 53 times BIGGER! It is HUGE! But hold your horses, there's a catch!
That huge $4 trillion number covers the entire global foreign exchange market, BUT retail traders (that's us) trade the spot market and that's about $1.49 trillion.
So now you know not to be fooled when you read how the forex market is so huge. It's definitely huge, but not as huge as the media would like you to believe.