The foreign exchange or foreign exchange market is a global market in which currencies of various countries are exchanged. As trade, commerce and finance spread all over the world, the foreign exchange market is the most traded market in the world, with a daily trading volume of US$5.1 trillion.

Foreign exchange transactions are always carried out in currency pairs-for example, EUR/USD. Customers speculate on whether the price of one currency will appreciate or depreciate relative to another currency

Most of the currency pairs are divided into the following categories:

  • Major currency pairs-seven currencies that account for 80% of global foreign exchange transactions. Including the euro against the dollar, the dollar against the yen, the pound against the dollar, and the dollar against the Swiss franc.
  • Minor currency pairs-trading frequency is low, usually exchange rates between major currencies rather than the US dollar. Including: Euro to British Pound, Euro to Swiss Franc, British Pound to Japanese Yen.
  • A major currency pair: a currency from a small or emerging economy. Including: USD/Zloty, British Pound/Mexican Dollar, Euro/Czech Krona.

Currency is always quoted in pairs, such as the euro against the dollar.

The first currency is called the base currency, and the second currency is called the counter currency or quote currency (base/quote).

For example, if you buy $1.1889 (USD) with €1.00 (EUR), then EUR/USD is equal to 1/1.1889. The Euro will be the base currency and the U.S. dollar will be the quote currency. This means that 1 euro can be exchanged for 1.1889 US dollars.

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