Forex currency is arguably the most important component of the foreign exchange market and transactions in context of this currency are exchange involvements in relation to currencies of many countries. It is also worthwhile to note here that profits accrue to Forex investors because of fluctuations in the value of a currency against that of other country.

Let us now read about major currencies of the Forex market that find prominence among Forex investors.

US Dollar (USD, $): The United States dollar has the biggest say (approximately 80 percent) in the world of foreign exchange with the currency considered as the reserve currency of the world.

Euro (EUR,€): Euro is rated superior to the USD in terms of total cash in circulation and is the currency of 16 member states of the Eurozone (Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain) with Estonia about to join the Eurozone in 2011.

British Pound (GBP, £): The Great Britain Pound is traded heavily against the USD and EUR and was first currency of the world to be traded in foreign exchange market via Trans-Atlantic cables.

Swiss Franc (CHF): The currency and legal tender of Switzerland and Liechtenstein is rated by many as a safe currency because of neutral, independent policies and private banking system of Switzerland but this currency is highly volatile and therefore lacks liquidity.

Now that we have read about some of the dominant world currencies, let us now read about currency pairing, reference currency, and counter currency.

Currencies involved in Forex trading are always traded in pairs and the rate at which the currency pair of a country is traded is its exchange rate. Some of the widely used currency pairs are EUR/USD, GBP/USD, and USD/CHF. The first currency of a currency pair is known as the reference or base currency and the second currency is known as counter or quote currency. In case of exchanges, the transaction amount is mentioned in the reference currency and transaction result (profit or loss, as the case may be) is denoted in the quoted currency. The plus sign (+) before the transaction result denotes profit and the negative sign (-) before the transaction result denotes loss.