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The field of currency trading differs considerably from trading of other financial instruments and commodities. Forex currency trading is considerably not the same as stock, bonds and futures trading. Understanding the basics of this market is very important for a trader to learn from the market.

The Biggest Financial Market: The daily trading volume of the currency market exceeds 4 trillion US dollars by far it is the largest financial market exists in the known universe. The main players from the market are banks including central banks. They carry out most of the big transactions of the market. The retail traders contribute a small sector of the market, however the contribution is growing swiftly over the years due to the ever increasing popularity of forex trading.

Twenty-four hours a day Exchanging Sessions: The world forex trading marketplace is open 24 hours a day from Sunday evening to Friday evening GMT. But the transaction volume in intraday trades show great variations as there are three major trading sessions as Asian session, European session and United states or US session. There is an overlapping of Asian and European sessions as well as European and US sessions in which the trading volumes can be quite high. And, there is a considerable gap between US session close and also the start of Asian session where the trading volumes can be very low. The currencies of nations from the particular region are most traded once the regional session is open.

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Over-The-Counter Trading and Currency Pairs: Currencies are traded in pairs. One can buy a currency by selling another. The cost relation between the two currencies is the exchange rate or the price of the pair and it is priced up to your fourth decimal point. The tiniest price change possible to a pair is known as pip and it generally equals 1/100 of 1% of the exchange rate. The trades are executed over-the-counter meaning directly between the buyer and seller; there aren't any centralized exchanges or regulatory bodies for forex trading.

The Three Types of Lots and their effects on trading: Forex trades are performed in lots. Now there are three kinds of lots available to retail traders as standard lot, mini lot and micro lot. A typical lot may be the position size that equals $100000, a mini lot equals $10000 and a micro lot equals $1000. When trading with standard lots, a pip difference in price may cause $10 profit or loss. Similarly with mini lots the same may cause $1 change and with micro lots a ten cent ($0.10) change. Also it ought to be noted the accessibility to the types of lots varies with broker since many brokers offer only standard and mini accounts.

The Most Popular Currencies: However, there are hundreds of currency pairs available for trading, most volume is contributed by only 18 currency pairs comprised of eight most widely used currencies. These currencies include USD (US Dollar), EUR (Euro), GBP (British Pound), JPY (Japanese Yen), CHF (Swiss Franc), CAD (Canadian Dollar), NZD (New Zealand Dollar) and AUD (Australian Dollar). Retails traders also prefer these currencies as they are most liquid.