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Course 103 – Buying And Selling Currency Pairs

Forex trading involves the exchange of one currency for another, in other words forex trade is the buying and selling of currencies simultaneously. When you trade in the forex market, you buy and sell in currency pairs.

For example, if you trade the euro and the US dollar (EUR/USD), that is a currency pair. Simply put, the two currencies you choose to trade on is referred to as currency pair. The first listed currency of a currency pair is called the base currency, and the second currency is called the quote currency.

Currency pairs compare the value of one currency to another the base currency (or the first one) versus the second, or the quote currency. It is usually indicated how much of the quote currency is needed to purchase one unit of the base currency.

There are several currency pairs in the world, as long as a currency is existing in the market, it is eligible to be paired, however some currency pairs are referred to as major currency pairs.

MAJOR CURRENCY PAIRS

In Forex trade, some currencies are more often the subject of forex transactions than others. The major currency pairs are usually the most liquid and most frequently traded currency pairs all over the world. The major currency pairs all have the U.S dollars as a part of the pair (it could either be the base or quote currency.)

A currency is said to be liquid if it is reasonably stable, and you can buy or sell without so many changes or impact to its rates.

The table below, shows the major currency pairs:

The fact that the above “major currencies pairs” are the most traded, doesn’t imply that other currency pairs cannot be profitably traded.

Other Currency pairs that don’t contain the U.S. dollar (USD) are known as cross-currency pairs or simply as the “crosses.”

OTHER TRADEABLE CURRENCIES (G10 CURRENCIES)

The G10 currencies comprises 10 of the most traded currencies in the world, they are also the 10 most liquid currencies.

          COUNTRY CURRENCY NAME CURRENCY CODE
United states Dollar USD
European Union Euro EUR
United Kingdom Pounds GBP
Japan Yen JPY
Australia Dollar AUD
New Zealand Dollar NZD
Canada Dollar CAD
Switzerland Franc CHF
Norway Krone NOK
Sweden Krona SEK
Denmark Krone DKK

 

EXOTIC CURRENCY PAIRS

A currency pair in the Forex market is regarded as an “exotic pair” when one of the major currencies is paired with the currency of a developing economy such as Brazil, South Africa Mexico or Hungary.

Trading exotic pairs are usually more expensive than the major pairs, and they are not often traded.

The table below shows examples of major pairs, minor pairs and exotic pairs:

 


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