The Currency Trading System and the Forex Market

The currency trading system involves the trading of world currencies on Forex. The Forex market is the largest financial trade market in the world with a volume that is estimated to be more than triple that of combined stocks and other futures markets. The Forex market is a spot trading market with no physical exchange. Forex involves electronic trading processes that are inclusive of a network of banks, corporations and individuals. The Forex market operates 24 hours per day, all around the world.

 

The currency trading system allows any currency that is backed by an existing nation to be traded. Of all of the currencies used in Forex trading systems, seven of those currencies are considered to be major Forex currencies. Major currencies are the currencies with the largest trading volume. Other currencies are considered to be minor currencies. Currencies are represented by a three-letter acronym. With most currencies, the first two letters represent the nation and the last letter represents the name of currency. The seven major currencies are as follows:

 

                                               

Nation	Symbol	Currency
United   States of America	USD	Dollar
European   members	EUR	Euro
Japan	JPY	Yen
Great   Britain	GBP	Pound
Switzerland   (Confederation Helvetica)	CHF	Franc
Canada	CAD	Dollar
Australia	AUD	Dollar

 

The Euro is used by some of the richest nations in the world and is considered a rival to the US dollar. The US dollar forms the foundation for the global economy. Huge reserves of US dollars are held as security by most foreign banks. Many people expect that the euro will replace the U.S. dollar as the currency kept in reserve. Twelve European nations make up the European Monetary Union (EMU) and have the Euro as its currency. The Euro presents an exception to the naming convention used above since each member of the EMU uses the acronym, EUR. The EMU consists of the following nations, territories, departments, collections and possessions:

 

Austria

Belgium

Finland

France

Germany

Greece

Ireland

Italy

Luxemburg

The Netherlands

Portugal

Spain

The Vatican City

The Principality of Andorra

The Principality of Monaco

The Republic of San Marion

Europa Island

French Guiana

Guadeloupe

Juan de Nova

The Madeira Islands

Martinique

Mayotte

Réunion

Saint Martin

Saint Pierre

Miquelon

The Azores

The Balearic Islands

The Canary Islands

The G7 is another group of nations in the currency trading system. The G7 is made up of the world’s richest economies. G7 members consist of the following nations

 

                                               

Nation	Currency	Country Code
U.S.	Dollar	USD
Great   Britain	Pound	GBP
Canada	Dollar	CAD
France	Euro	EUR
Germany	Euro	EUR
Italy	Euro	EUR
Japan	Yen	JPY

Table 1: G7 Member Nations

Since the fall of the Soviet Union, there has been talk of a G8, which includes Russia as a member of the group listed above.

 

The currencies of lesser-known countries in the currency trading system are known as exotics. Exotics are considered to be the high-risk currencies in trading. Exotics that are most actively traded include the New Zealand dollar (NZD), the South African rand (ZAR) and the Singapore (SGD) dollar. Other noteworthy exotics include the Chinese yuan (CNY), Brazilian real (BRR) and South Korean won (KRW).