Trading currency pairs is conducted in the foreign exchange market. It is the largest and most liquid market in the financial world. This market allows for the buying, selling, exchanging, and speculation of currencies. It also enables the conversion of currencies for international trade and investment. The forex market is open 24 hours each day , five days every week (except holidays), and sees an enormous amount of trading volume.
All forex trades involve the simultaneous purchase of one currency and sale of another, but the currency pair itself are often thought of as one unit—an instrument that is bought or sold. When you buy a currency pair from a forex broker, you buy the base currency and sell the quote currency. Conversely, once you sell the currency pair, you sell the bottom currency and receive the quote currency.
Currency pairs are quoted based on their bid (buy) and ask prices (sell). The price is that the price that the forex broker will buy the bottom currency from you in exchange for the quote or counter currency. The ask—also called the offer—is the worth that the broker will sell you the bottom currency in exchange for the quote or counter currency.
When trading currencies, you’re selling one currency to shop for another. Conversely, when trading commodities or stocks, you’re using cash to shop for a unit of that commodity or variety of shares of a specific stock. Economic data concerning currency pairs, like interest rates and economic process or gross domestic product (GDP), affect the costs of a trading pair.