Most Popular Currency Pairs

The following major currency pairs make up over 90% of forex transactions:

1. EUR/USD (Euro Dollar)

2. GBP/USD (Pound Dollar)

3. USD/JPY (Dollar Yen)

4. USD/CHF (Dollar Franc)

5. AUD/USD (Australian Dollar)

6. USD/CAD (Dollar Canadian)

 
Forex news and opinion pieces often refer to currencies and pairs by their slang names:

AUD - "Aussie"

CAD - "Loonie"

CHF - "Swissie"

GBP - "Quid" or "Cable" or "Sterling"

NZD - "Kiwi"

USD - "Greenback"

GBP/JPY - "Guppy"

Forex Accronyms

ADR - American Depositary Receipts (the issuance of ADS')

ADS - American Depositary Share (dollar-denominated equity share of a foreign-listed company available through depository banks).

BIS - Bank for International Settlements monitors balances of payment between countries and is based in Basel, Switzerland

BOC - Bank of Canada is Canada's central bank based in Ottawa

BOJ - Bank of Japan is Japan's central bank based in Tokyo

BOP - International Balance of Payments is a record of all transactions between countries

CIC - China Investment Corporation

CTA - Commodity Trading Advisor

ECB - European Central Bank

EMS- European Monetary System

ESF - Exchange Stabilization Fund

FCCB - Foreign Currency Convertible Bond

FX - Forex

IMF - International Monetary Fund is a dollar-denominated bank based in Washington, DC that monitors world economy and loans to developing countries

NDF - Non-deliverable forward

NDS - Non-deliverable swap

NEER - National Effective Exchange Rate

PPP - Purchasing Power Parity

SDR - Special Drawing Rights

SPOT - Single Payment Options Trading

T/P - Take Profit Order

UIP - Uncovered Interest Rate Parity

USDX - US Dollar Index

Forex Terms

base currency - also known as the domestic or accounting currency (e.g. the euro is the base currency in EUR/USD)

 

bid/ask spread - the difference between the highest price a buyer is willing to pay and the lowest price a seller is willing to accept

cash delivery - also known as same day delivery, is when the transaction delivery and settlement occur on the same day

clearing - when a trader Hedges a number of items against one another and makes fund transfers on the net balance as part of the settlement process.

commodity block currency - a currency whose price moves in the direction of a certain commodity
 

figure - a round number like 1.600000
 

pip - each unit between the bid and ask prices
 

swap - The amount paid or received as a result of interest rate differences between the two currencies you're trading (if held overnight).  For example, if you're long EUR/USD and dollar interest rates are less than the euro, you're paid the swap (you're debited if you went short EUR/USD).

yard - a billion units

Forex FAQs

Q: What is Forex?

A: A financial market of transactions involving the simultaneous purchase and sale of 2 currencies which have prices based on floating exchange rates.

Q: Is there a Forex Exchange (like a bourse/stock exchage)?

A: No, the Forex Market is an OTC (over-the-counter) market.

Q: When does the market open/close?

A:  The beauty of the Forex market is that you can trade 24-hours a day from anywhere in the world (mostly closed over the weekend) .  This is one of the main advantages that Forex has over the stock markets.

Q: Is there a minimum amount of capital required in order to day trade?

A: Unlike stock market day trading, there is no minimum for the forex market; however most brokers will require anything from $1,000 to $10,000 in initial investment.

Q: Do forex brokers charge commissions per trade?

A:  No, however, they do make money off the bid/ask spread

Q: Just how big has forex become?

A: Since its inception in 1971, The Foreign Exchange has grown significantly and now over $1.5 T is per day.