From time immemorial man has been fascinated with one form or another of currencies. This is partly the reason that drove many of the ancient civilizations to have currencies that were made from precious metals. The metals had an intrinsic value as well as being valued as a way of trading among nations. This is the way the world became highly involved and dependant on gold. There was nothing better than to be backed by gold. All cultures, whatever their origin may be have a deep rooted connection with gold even today.
As international trade grew in stature they needed to trade one world currency for another and this brought about the foreign currency exchange where currencies are traded on a daily basis. Soon, it became much more than just trade between countries and currencies were traded by themselves to gain profit. This is in short what takes place in the Forex market or the FX market. Trading in currencies can be a lot of fun and really profitable as well if done with knowledge of the trade.
What is bought and sold in the currency market are currencies of the world. Some currencies are sought after while others are traded less. This is because the strong currencies command a better exchange rate and the strong currencies belong to the countries that have strong economies. If the economies are weak the currencies will be weak as well. In the Forex market currencies are traded in pairs and this invariably pits one currency against another and tells us how much of one currency is able buy the other currency unit. It is this paring of the two currencies that are bought and sold simultaneously that is called a currency pair.
The currency pairs thus traded in the Forex market can be categorized as major currency pairs, currency crosses and exotic currency pairs. It is the currency pairs that are made up of the major currencies that dominate the Forex market. The major currencies are the US dollar or USD, the Great British pound or the GBP, the Japanese yen or the JPY, the Euro or the EUR, the Swiss Franc or the CHF, the Canadian dollar or the CAD and the Australian dollar or the AUD. Currency pairs made up of these currencies are the ones which are heavily traded in the Forex market.
Currency crosses are currency pairs that do not contain the US dollar either as the base currency or the counter currency and can be made up of any of the other major currencies. The exotic currencies on the other hand are far less traded in the Forex market and even then are treated with caution because they are less stable. Trading in exotic currencies can be as profitable as any of the major currencies if you are willing to take the gamble.

Trading in the Forex market is done in standard units. One standard unit is equal to $100,000. This is not within the budget of the average trader. It is to overcome this problem that the concept of leverage was introduced. Now, with leverage even investors with a few hundred or thousands of dollars are able to enter the Forex market. This is with the leverage offered by Forex brokers.
Another reason why leverage is needed in the trade of currency is due to the fact that currency prices move in very small points and is insignificant at best. When you apply leverage this shows enough movement so that profits can be calculated accordingly. There is also a downside to this. That is, the losses while operating with leverage is also augmented in the same way and the trader stands to loose substantially.
Leverage actually works as a loan that the trader has taken from the Forex broker. Indeed, interest is calculated accordingly and thereafter is set off against the interest earned through the profits that the trader collects by trading currency with leverage. How much leverage can you get? This is totally dependant upon the margin deposit that the trader makes and then the Forex broker will decide on the leverage to be given. For example, if a trader who has a margin deposit of $1000 is offered leverage amounting to 200:1 he will be able to trade with $200,000 or if you take it in units the trader will be able to trade with two units of $100,000 each. Forex brokers offer the average trader the chance to operate even with a few hundred dollars as a margin deposit. The margin deposit is actually considered as collateral for the loan which is what leverage is. If a trader is low on funds in his margin deposit then the Forex broker will initiate a margin call which indicates to the trader the need to add to his deposit or to close the position.
A trader who knows how to maximize his profits with the help of leverage will certainly be able to build a wealth base easily. Therefore, time spent in learning how to earn from leverage is very important to all who trade real currency online.