Forex Overview

Currencies are always traded in pairs. The first currency in the pair is called the base currency and the second the quote currency. Forex traders buy one currency in the pair and sell the other at the same time, depending on how they think their values will change in relation to each other.

Currency values can be affected by a number of factors that impact the strength of a nation’s economy, including inflation, interest rates and political stability to name a few. Typically, forex traders see the greatest volatility before and after key economic or political events as they speculate how this could affect the markets.

Currency pairs are split into three categories. Major currency pairs are the most traded pairs in the forex industry. They usually include the US dollar as one half of the pair, like the EUR/USD and the USD/JPY. Other commonly traded major pairs include EUR/JPY and the EUR/GBP.