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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.

Quoting Conventions

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:

Symbol Currency Pair Trading Terminology
GBPUSD British Pound / US Dollar "Cable"
EURUSD Euro / US Dollar "Euro"
USDJPY US Dollar / Japanese Yen "Dollar Yen"
USDCHF US Dollar / Swiss Franc "Dollar Swiss", or "Swissy"
USDCAD US Dollar / Canadian Dollar "Dollar Canada"
AUDUSD Australian Dollar / US Dollar "Aussie Dollar"
EURGBP Euro / British Pound "Euro Sterling"
EURJPY Euro / Japanese Yen "Euro Yen"
EURCHF Euro / Swiss Franc "Euro Swiss"
GBPCHF British Pound / Swiss Franc "Sterling Swiss"
GBPJPY British Pound / Japanese Yen "Sterling Yen"
CHFJPY Swiss Franc / Japanese Yen "Swiss Yen"
NZDUSD New Zealand Dollar / US Dollar "Kiwi"
USDZAR US Dollar / South African Rand "Dollar Zar" or "South African Rand"