we tread currenct, Simple Answer . We are not actually buying any physical product in forex market. So this kind of trading seem little bit confusing in general people. When we buy a currency, we are buying some economy in that country, like buying a company’s share. The currency price is the mirror of current and future economic conditions of that country.
When we buy Canadian dollar, we basically buy a share in the Canadian economy. We think the Canadian economy is improving so we buy Canadian dollar. When we sell (sell) those currency, we hope Canada lose their economic gain compare with other country.
In general, the exchange rate of another currency with a currency reflects the economy of another country compared to that of the country's economy. Hear bellow picture given most importan currency name and country name:
we see, All currency symbols have three letters, first two represent the name of the country, and the third indicates the currency name of that country.
For example USD, UNITED STATE, first two words used for country name, and trird represent to UNITED STATE currency name DOLLER.