currency trading market

Forex Trading - What Are Currency Pairs?

Forex trading involves, well, exchange of currencies. A forex trader is making a bet that a currency he buys will appreciate in relative value, and can be sold for another currency later for a profit.
If all that sounded like mumbo jumbo, let's walk through a current example.
Right now, a Euro costs $1.43. That means that to buy one Euro, you'll be spending a $1.43 to get it. The number of dollars it takes to buy a Euro is called the exchange rate, and the dollar and Euro, combined, are a currency pair, meaning you can exchange them directly through a broker. (Some currencies are not paired up for direct exchanges - the Russian ruble is one that doesn't have an exchange pairing with the US dollar.)
Now, a hypothetical position for a forex trade would be to buy Eurors at $1.43, with the expectation that they'd trade at a higher exchange rate in the future, say $1.50 by the end of the week, at which point you'd either hold them (expecting further gains) or sell them (to realize your profit).
The swing in a currency pair is how far that exchange rate can shift in a given time period; there are short term swings (that happen whenever one of the major foreign currency exchanges closes) and long term positions and swings, and you can make a viable forex strategy playing either of them.
Capitalizing on short term swings in currency pairs means monitoring data constantly - the currency exchange markets move over three trillion dollars of currency every day, mostly by national banks and lending institutions - so there's plenty of data available. The problem isn't data paucity, it's that you're swimming in it. It's not difficult to make a decent income on currency trading by riding the swing on a currency pair, but it is tedious and requires near constant attention...and it requires something referred to as "leverage".
Most currency swings are measured in thousandths of a cent, called basis points or pips, and most of the swings range from 2 to 10 pips at any given movement. To make a decent profit on such a small change in the exchange rate, you have to be moving a lot of dollars or a lot of Euros at once. Most currency traders buy on margin - they borrow money to make the purchases, and hope to sell when the currency has appreciated more than the interest on the money they borrowed is. Handled well, this is a viable strategy - but it's probably not a good idea for a personal investment methodology.
Another investment methodology is position trading; buy a currency that you think is under valued based on world events, and wait for it to appreciate - instead of watching every open and close like a vulture, you watch the news and you play with patience on your side. If you're taking a particularly long term position, invest your foreign currencies in interest bearing financial tools, like money markets or certificates of deposits denominated in that currency.