What Is Currency Trading?

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Currency trading is the largest market on the planet. . Compare this to the New York Stock Exchange’s daily transactions of approximately US$50 billion, and you can see that the magnitude of the currency trading market exceeds all other equity markets in the world combined.

All currency has a value relative to other currencies on the planet. Currency trading uses the purchase and sale of large quantities of currency to leverage the shifts in relative value into profit.

What is the FX market?

Think that the EUR/USD is going to spiral downward? Feel free to short the pair at will. There is no uptick rule in FX as there is in stocks. No one will ever prosecute you for insider trading should your bet pay off. There is no such thing as insider trading in FX;

EUR/USD (euro/dollar)
USD/JPY (dollar/Japanese yen)
GBP/USD (British pound/dollar)
USD/CHF (dollar/Swiss franc)

and the three commodity pairs:

AUD/USD (Australian dollar/dollar)
USD/CAD (dollar/Canadian dollar)
NZD/USD (New Zealand dollar/dollar)

What is the FX market?

The FX market is different from other markets in some other key ways that are sure to raise eyebrows. Think that the EUR/USD is going to spiral downward? Feel free to short the pair at will. There is no uptick rule in FX as there is in stocks. There are also no limits on the size of your position (as there are in futures); so, in theory, you could sell $100 billion worth of currency if you had the capital to do it. If your biggest Japanese client, who also happens to golf with Toshihiko Fukui, the Governor of the Bank of Japan, told you on the golf course that BOJ is planning to raise rates at its next meeting, you could go right ahead and buy as much yen as you like. No one will ever prosecute you for insider trading should your bet pay off. There is no such thing as insider trading in FX; in fact, European economic data, such as German employment figures, are often leaked days before they are officially released.

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