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What is a Currency Pair?
The term currency pair is often used in forex as it is in fact what forex trading relies upon. Every trade is going to involve two currencies, thus the term currency pair.
One currency is quoted against another currency. The first currency is referred to as the base currency whereas the second one is the quote currency. Hence you will be seeing how much of the quote currency you are going to need so as to purchase one unit of the base currency.
All currencies are identified by an alphabetic code composed of three letters. This is technically referred to as the ISO currency code. For example the US dollar is USD, the Euro is EUR.
The forex market is the largest market in the world, and it is also the most liquid one. This market is open 24 hours a day and the trading volume is phenomenal. When a currency pair is bought from a broker, you will be buying the base currency and simultaneously selling the quote currency.
The currency pairs are based on the bid and ask prices. The bid price is the price at which the broker will be buying the base currency from the trader, in exchange for the quote currency. The ask price, or the offer, is the price which the broker will be selling the base currency to the trader, in exchange for the counter currency.
There are some currency pairs which are more popular than others. For insance the EUR/USD is the most liquid currency pair and as a result it is also the most heavily traded pair. The USD/JPY pair is also a very popular currency pair. Other ones include the GBP/USD, USD/CHF, USD/CAD and AUD/USD.
There are also currency pairs which do not involve the USD, and these are referred to as minor currencies, or crosses. These are not as liquid as majors. Some examples of these pairs include EUR/GBP, EUR/CHF and GBP/JPY.
There are also exotic currency pairs which refer to those pairs from emerging markets. These are not that liquid and have wider spreads. An example of such currency pairs is the USD/SGD.
One currency is quoted against another currency. The first currency is referred to as the base currency whereas the second one is the quote currency. Hence you will be seeing how much of the quote currency you are going to need so as to purchase one unit of the base currency.
All currencies are identified by an alphabetic code composed of three letters. This is technically referred to as the ISO currency code. For example the US dollar is USD, the Euro is EUR.
The forex market is the largest market in the world, and it is also the most liquid one. This market is open 24 hours a day and the trading volume is phenomenal. When a currency pair is bought from a broker, you will be buying the base currency and simultaneously selling the quote currency.
The currency pairs are based on the bid and ask prices. The bid price is the price at which the broker will be buying the base currency from the trader, in exchange for the quote currency. The ask price, or the offer, is the price which the broker will be selling the base currency to the trader, in exchange for the counter currency.
There are some currency pairs which are more popular than others. For insance the EUR/USD is the most liquid currency pair and as a result it is also the most heavily traded pair. The USD/JPY pair is also a very popular currency pair. Other ones include the GBP/USD, USD/CHF, USD/CAD and AUD/USD.
There are also currency pairs which do not involve the USD, and these are referred to as minor currencies, or crosses. These are not as liquid as majors. Some examples of these pairs include EUR/GBP, EUR/CHF and GBP/JPY.
There are also exotic currency pairs which refer to those pairs from emerging markets. These are not that liquid and have wider spreads. An example of such currency pairs is the USD/SGD.