The foreign exchange market differs from stock markets or futures markets in that there is no physical location or central exchange where trading takes place. Instead, the market consists of a network of large banks and dealers, with much of the trading handled over the phone. In recent years, private traders have been able to gain access to this "over-the-counter" market through retail-level currency brokers and online trading platforms.
Daily turnover in the forex market is enormous - in excess of a trillion US dollars.
85% of all transactions involve a group of currencies known as the "majors." These currencies include the US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar. About 60% of trading is concentrated in the 3 leading pairs - USD/EUR (30%), USD/JPY (20%) and GBP/USD (10%).
The interbank forex market trades seamlessly around the clock, following the sun across the globe for five days each week. Trading begins early on Monday morning in Sydney and finishes in New York on Friday afternoon, with activity usually peaking during the morning hours in London.
In every currency transaction, a trader simultaneously buys one currency and sells another. The first currency in the pair is referred to as the base currency, and the second currency is the counter or quote currency. The U.S Dollar, as the world's dominant currency, is usually considered the base currency for quotes - e.g USD/JPY, USD/CHF, and USD/CAD. This means that quotes are expressed as a unit of $1 USD per the other currency quoted in the pair.
A quote of USD/JPY 120.05 means that 1 unit of the base currency (one US dollar) is equal to 120.05 Japanese Yen
Exceptions to this rule include the Euro, British Pound and Australian dollar. These currencies are typically quoted as US dollars per foreign currency.
The table below lists some prominent currency pairings:
||British Pound / US Dollar
||Euro / US Dollar
||US Dollar / Japanese Yen
||US Dollar / Swiss Franc
||"Dollar Swiss", or "Swissy"
||US Dollar / Canadian Dollar
||Australian Dollar / US Dollar
||Euro / British Pound
||Euro / Japanese Yen
||Euro / Swiss Franc
||British Pound / Swiss Franc
||British Pound / Japanese Yen
||Swiss Franc / Japanese Yen
||New Zealand Dollar / US Dollar
||US Dollar / South African Rand
||"Dollar Zar" or "South African Rand"