MONEY is the simple answer. Especially money. Forex trading might be confusing because you are not purchasing something physically, therefore we will use a simple comparison to help clarify.
Consider purchasing currency to be similar to purchasing stock in a specific country or corporation. Currency values are typically a direct reflection of the economy’s current and future health and stability.
When you buy the Japanese yen in forex trading, you are essentially buying a “share” in the Japanese economy.
You are wagering that the Japanese economy is performing well and will continue to improve over time. When you sell those “shares” back to the market, you should make a profit.
In general, the exchange rate of a currency against other currencies reflects the state of that country’s economy in comparison to other economies.
Major Currencies
While there are many currencies that can be traded, as a beginner forex trader, you will most likely begin dealing with the “majorcurrencies.”
They are referred to as “major currencies” since they are the most traded currencies and represent some of the world’s largest economies. Forex traders have different ideas about what constitutes a “major currency.” We organized them above by symbol, country of use, currency name, and nickname.
Currency symbols always consist of three letters, the first two of which represent the name of the country and the third of which symbolizes the name of the country’s currency.
For example, NZD. NZ stands for New Zealand and D stands for Dollars. Easy, right?
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