Knowing the world currency market basics is important for success in online forex trading. Being the leading financial market in the known universe with a daily trading volume exceeding 4 trillion US dollars, the forex market has many things peculiar to other markets.
- The world forex market is open 24 hours a day from Sunday evening to Friday evening. But it operates in three major sessions as Asian, European and American with session overlaps and gaps.
- Currencies of countries from particular region are most traded when the regional session is open. Or every currency pair has high volume peaks and depths with change in trading sessions.
- Currencies are traded in pairs where you buy one currency by selling another. Currencies are priced to the fourth decimal point. One pip in this smallest increment which is typically equals 1/100 of 1% of exchange rate.
- Traders trade currencies in lots. There are three types of lots – micro, mini and standard. In US dollars, a micro lot denotes $1000, a mini lot represents $10000 and a standard lot represents $100000.
- In USD, one pip move results a 10 cent difference in value of a micro lot, a $1 difference in mini lot and a $10 difference in standard lot.
- Although there are many currency pairs available, majority of trades take place in 18 currency pairs of 8 most popular currencies. These include US Dollar (USD), British Pound (GBP), Euro (EUR), Canadian Dollar (CAD), Swiss Franc (CHF), Japanese Yen (JPY), Australian Dollar (AUD) and New Zealand Dollar (NZD).