A currency pair is a price quote of the exchange rate for two different currencies traded in the foreign exchange market.
Forex trading is the simultaneous buying of one currency and selling another.
When you trade in the forex market, you buy or sell in currency pairs.
Each currency in the pair is listed as a three-letter code.
The first two letters identify the name of the country and the third letter identifies the name of that country’s currency, usually the first letter of the currency’s name.
For example, USD stands for the US dollar and CAD for the Canadian dollar
In the USD/CAD pair, you arebuying the U.S. dollar by selling the Canadian dollar.
The first currency listed in a currency pair is called thebase currency, and the second currency is called thequote currency.
The quote currency is also known as the “counter currency”.
Currency pairs compare the value of one currency to another.It indicates how much of the quote currency is needed to purchase one unit of the base currency.
The price of a currency pair is how much one unit of thebase currencyis worth in thequote currency.
For example, for the currency “EUR/USD”,EUR is the base currency and USD is thequote currency.
If EUR/USD is trading at 1.0950, then one euro is worth1.0950 U.S. dollars.
If the euro appreciates against the dollar, then a single euro will be worth more dollars and the pair’s price will rise.
If the euro depreciates against the dollar, the pair’s price will fall.
If you think that the base currency in a pair is likely to strengthen against the quote currency, you can enter a long position (“buy the pair”).
If you think it will weaken, you can enter a short(“sell the pair”).
Learn more aboutcurrency pairsand the different types like the “Majors” and “Minors”.
You can see a long list of currencies that trade against the USD here.
FAQs
A currency pair is a quotation of two different currencies, where one is quoted against the other. The first listed currency within a currency pair is called the base, while the second currency that is the benchmark is called the quote.
What currency is used in pairs? ›
Examples include the euro and Swiss franc (EUR/CHF), Canadian dollar and Japanese yen (CAD/JPY), or pound sterling and Australian dollar (GBP/AUD). Cross pairs can provide trading opportunities when the majors are presenting less favourable conditions. There are also exotic currency pairs.
Do you buy or sell currency pairs? ›
You would buy the pair if you expected the base currency to strengthen against the quote currency, and you would sell if you expected it to do the opposite.
What are the big 5 forex pairs? ›
The five currencies that make up the major pairs—the U.S. dollar, euro, Japanese yen, British pound, and Swiss franc—are all among the top seven of the most traded currencies as of 2021. The EUR/USD is the world's most heavily traded currency pair, representing more than 20% of all forex transactions.
What is the weakest currency in the world? ›
What Is the Weakest Currency in the World? The weakest currency in the world is the Iranian rial (IRR). The USD to IRR operational rate of exchange is 371,992, meaning that one U.S. dollar equals 371,922 Iranian rials.
What is the safest currency in the world? ›
What is the safest currency in the world? The Swiss franc (CHF) is generally considered to be the safest currency in the world and many investors consider it to be a safe-haven asset. This is due to the neutrality of the Swiss nation, along with its strong monetary policies and low debt levels.
Which currency pairs trend the most? ›
Since the US Dollar is part of 80% of daily Forex trading volume, either as a quote or base currency, the best currency pairs for trend traders include the EUR/USD, which is the most liquid currency pair accounting for approximately 28% of all daily trades, the USD/JPY, and the GBP/USD.
What are exotic pairs? ›
Exotic currency pairs are the third most traded in the forex market. These pairings include the combination of one of the 8 major currencies and a currency from a developing or emerging economy. There are also many popular exotic pairs amongst traders that are exotic vs exotic, such as NOK/TRY or TRY/RUB.
Which currency pair is the most liquid? ›
What are the most liquid currency pairs in forex?
- EUR/USD is the most liquid forex pair and represents 20-30% of the forex market by trading volume. ...
- USD/JPY comes second with the Japanese Yen being one of the most heavily traded currencies and a major safe-haven currency too.
Market participants use forex to hedge against international currency and interest rate risk, to speculate on geopolitical events, and to diversify portfolios, among several other reasons.
The EUR/USD pair holds the throne as the most traded forex pair globally, known for its liquidity and stability. Traders often turn to this pair for its reliability and consistent profit opportunities.
When should I buy a currency pair? ›
The best time to trade is when the market is most active. When more than one of the four markets are open simultaneously, there will be a heightened trading atmosphere, which means there will be more significant fluctuation in currency pairs.
What are the 5 common currency? ›
Template:Most traded currencies
| Rank | Currency | Code |
|---|
| 1 | U.S. dollar | USD |
| 2 | Euro | EUR |
| 3 | Japanese yen | JPY |
39 more rowsThe 6 Major Currency Pairs in Forex: A Guidance to the Most Traded Currency Pairs. In this post, we will look at the six major currency pairs in Forex: EUR/USD, USD/JPY, GBP/USD, USD/CHF, USD/CAD, AUD/USD.
