Currency and Exchange Rates

Confused with currency exchange!

How can you trade something that you can't see or touch? Since trading currencies isn't something physical FOREX might seem confusing in the beginning. One way to brush the confusion away is to think of buying a currency in the same way as you think of buying shares in a particular country.  EXAMPLE: Let's say, you decided to buy Japanese Yen. What exactly did you do? You bought a share in the Japanese economy. The value of the currency is an upfront indication of what the market thinks of Japanese economy today and in the future. 

What does exchange rate show?

The exchange rate of a certain currency against currencies from other countries shows the condition of that country's economy compared to the other countries' economies.  

What is the most traded currency?

Currently US dollar (USD) is the most traded currency. Other major currencies after US dollar are:

How is the currency trading performed? 

A broker or a dealer is the link in FOREX and currencies are traded in pairs: For example the Euro dollar and the US dollar (EUR/USD) or the British pound and the Japanese Yen (GBP/JPY).