Types of Currencies traded on Forex Exchanges
Currencies are units of currency that are accepted around the world as units of account. A unit of currency is any physical currency that can be exchanged for another unit of currency. In its most basic sense, a currency in this sense is any currency in whatever form it was issued – whether in use as a legal tender, circulating coin or redeemable bank notes – when at use or circulating as a medium of trade. Most countries issue their own coins, which are known as ‘ruins’ or ‘bills.’ These ‘ruins’ are typically collected by citizens or foreigners who wish to exchange them for cash or other goods.
Currencies are usually traded on the over the counter (OTC) marketplaces. OTC markets are the places where currencies are traded back and forth between buyers and sellers. The biggest and most well known of these markets are the London Stock Exchange (LSE), the New York Stock Exchange (NYSE) and the Chicago Board of Trade (CBT). Currencies can also be traded in what are called electronic forex trades, or forex exchanges. This type of exchange is fast paced and highly volatile, making it unsuitable for regular investors.
Banks also participate in forex market operations. They purchase one kind of currency and then trade it on the OTC for another kind of currency, facilitating the trading between buyers and sellers. Although some of these banks may have only small amounts of foreign currency trading activity, many larger banks and credit unions trade vast amounts of currencies on the forex market each day. Large amounts of money are traded on the forex market every day.