The relative movement of the currencies of various countries gives rise to an interesting form of trading, one which does not actually involve the buying & selling of monies. This is called currency trading.
A light-hearted look at trading - almost as old as humanity
The EUR/USD rate represents the number of USD one EUR can buy.
If you think the Euro will increase in value against the US Dollar, you buy Euros with US Dollars. If the exchange rate rises, you sell the Euros back, and you cash in your profit.
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FOREX - What is it ?!
Forex is a nickname for what is more formally known as the foreign exchange market.
The foreign exchange market is the largest financial market in the world. It is estimated that somewhere between 2 and 3 trillion dollars worth of currency is exchanged every day! To put this in perspective, the New York Stock Exchange (NYSE) averages roughly $50 billion dollars in volume per day. This means that the Forex market is roughly 50 times the size of the NYSE!
The Forex market is a pure market and free from any external control.
The mechanics of a trade are virtually identical to those in other markets. The only difference is that you're buying one currency and selling another at the same time. That's why currencies are quoted in pairs, like EUR/USD or USD/JPY. The exchange rate represents the purchase price between the two currencies. As the Forex market is so vast, there are buyers and sellers 24 hours a day, 5 days a week. This is trading "liquidity" meaning that sellers will always find buyers for their currency.