BACKGROUND

The foreign exchange market differs from stock markets or futures markets in that there is no physical location or central exchange where trading takes place. Instead, the market consists of a network of large banks and dealers, with much of the trading handled over the phone. In recent years, private traders have been able to gain access to this "over-the-counter" market through retail-level currency brokers and online trading platforms.

Daily turnover in the forex market is enormous - in excess of a trillion US dollars.

85% of all transactions involve a group of currencies known as the "majors." These currencies include the US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar. About 60% of trading is concentrated in the 3 leading pairs - USD/EUR (30%), USD/JPY (20%) and GBP/USD (10%).

The interbank forex market trades seamlessly around the clock, following the sun across the globe for five days each week. Trading begins early on Monday morning in Sydney and finishes in New York on Friday afternoon, with activity usually peaking during the morning hours in London.

Quoting Conventions

In every currency transaction, a trader simultaneously buys one currency and sells another. The first currency in the pair is referred to as the base currency, and the second currency is the counter or quote currency. The U.S Dollar, as the world's dominant currency, is usually considered the base currency for quotes - e.g USD/JPY, USD/CHF, and USD/CAD. This means that quotes are expressed as a unit of $1 USD per the other currency quoted in the pair.

A quote of USD/JPY 120.05 means that 1 unit of the base currency (one US dollar) is equal to 120.05 Japanese Yen

Exceptions to this rule include the Euro, British Pound and Australian dollar. These currencies are typically quoted as US dollars per foreign currency. The table below lists some prominent currency pairings:

Symbol	Currency Pair	Trading Terminology
GBPUSD	British Pound / US Dollar	"Cable"
EURUSD	Euro / US Dollar	"Euro"
USDJPY	US Dollar / Japanese Yen	"Dollar Yen"
USDCHF	US Dollar / Swiss Franc	"Dollar Swiss", or "Swissy"
USDCAD	US Dollar / Canadian Dollar	"Dollar Canada"
AUDUSD	Australian Dollar / US Dollar	"Aussie Dollar"
EURGBP	Euro / British Pound	"Euro Sterling"
EURJPY	Euro / Japanese Yen	"Euro Yen"
EURCHF	Euro / Swiss Franc	"Euro Swiss"
GBPCHF	British Pound / Swiss Franc	"Sterling Swiss"
GBPJPY	British Pound / Japanese Yen	"Sterling Yen"
CHFJPY	Swiss Franc / Japanese Yen	"Swiss Yen"
NZDUSD	New Zealand Dollar / US Dollar	"Kiwi"
USDZAR	US Dollar / South African Rand	"Dollar Zar" or "South African Rand"