Currencies are the world's largest and most active trading market, followed by treasuries, equities and commodities. While foreign exchange trading has long been dominated by large global banks and institutions, it has become increasingly popular with and accessible to individual investors.
Trading currencies is a bit different to other asset classes. Trading in other assets involves trading in one market with profit and loss based on absolute returns (I bought. It went up, I made money, it went down, I lost money).
Currency trading is done in pairs, with one currency being traded against another. Returns in currency markets are relative, with profit and loss being measured by how one currency performs relative to another. For example, on a given day, the US dollar (USD) could appreciate relative to the euro (EUR), Swiss franc (CHF) and British pound (GBP), but decline relative to the Japanese yen (JPY), Canadian dollar (CAD) and Australian dollar (AUD).
As the world's reserve currency, trading in US dollar related pairs is the foundation of currency trading around the world. The most active pairs (also known as the majors) include EUR/USD, GBP/USD, USD/CHF and USD/JPY. Currency pairs that don't involve USD are known as cross pairs. Popular cross pairs include GBP/EUR, EUR/JPY and AUD/CAD.
Pricing in currencies is based on the first currency in the pair, also known as the base currency. In the case of EUR/USD, this means how much USD it would take to buy one EUR. When EUR/USD goes up it means that the EUR is gaining in value and when EUR/USD goes down, it means EUR is losing value or USD is gaining value.
Trading in resource currencies such as AUD/USD and USD/CAD is also popular as the valuation of these currencies plus those of other resource-producing nations such as the New Zealand dollar (ZND), Norwegian krona (NOK) and South African rand (ZAR) tend to be influenced by commodity prices which represent a significant part of the goods traded by these countries. Note that CAD and NOK tend to be more sensitive to energy prices, AUD and NZD to metal and grain prices and ZAR to precious metal prices.