The answer is simple – MONEY. Forex trading can be quite confusing for others as there are no physical purchases. One way to look at how forex works is by thinking of buying currency as purchasing shares of a specific country, similar to buying company stocks.
The currency price is the market’s indication on the future and current economic well-being of a country.
So when you purchase a country’s currency, you are purchasing shares in the country’s economy and invest in currency trading companies. You are forecasting that your chosen country’s economy will rise as time passes, with the hopes of gaining profit when you sell the currency back to the market.
To simplify, exchange rates between currencies is the indication of a country’s economy compared to another country.
New traders should focus on the major currencies despite the number of currencies that you can potentially trade – CAD, GBP, EUR, USD, CHF, JPY, AUD, and NZD.
There are three letters in any currency symbols, where the first two identifies the country with the third identifying the currency – like USD which means Unite States Dollar.
These currencies stated above are called major currencies as they are the most heavily and widely traded currencies.