Currency Pair Definition

In some cases, the currency by itself is known by a different name. For example, the US dollar is often referred to as the ‘greenback’, while you may hear the British pound referred to as ‘sterling’. In contrast, professional Interbank traders will typically deal directly with other professional forex market counterparties at banks and other financial institutions. The total sum is 200% because each currency trade always involves a currency pair; one currency is sold (e.g. US$) and another bought (€). Therefore each trade is counted twice, once under the sold currency ($) and once under the bought currency (€).

Interest rates – Volatile currency moves tend to occur when a country’s central bank makes an unexpected move in interest rates. For example, if a central bank decides to unexpectedly cut interest rates the currency, this will normally lead to a significant drop in Core Spreads Alternatives For 2021 value . ‘Exotic’s’ are characterised by the pairing of one major currency with the currency of an emerging economy (Mexico, Brazil etc.). In essence, if you have a scalping or day trading strategy, you need the fastest moving pairs with the lowest costs possible.

How Much Does Trading Cost?

The more widely traded a currency is, the easier it will be to trade and the lower spreads you’ll find. For example, when you’re selling US dollars, you need to know what you’re selling it for. GBP/USD – This is a popular currency pair that tends to be more volatile than EUR/USD. Volatility in GBP/USD has been higher in recent times due to the effects of “Brexit” (Britain’s exit from the EU) and the economic uncertainty this has created. EUR/USD – This is the most widely-traded pair with the highest volume and deepest liquidity.

This is because a currency’s interest rate is such a big factor in determining its perceived value. A hard currency is one which is less likely to depreciate suddenly, or fluctuate much in value. It’s a stable currency which is widely accepted, and typically highly liquid in the forex market.

So What Do I Trade? (top Secret)

I enjoy trading the majors, but I certainly don’t discriminate should a compelling setup arise on something less liquid. But I will say that this is the first time I’ve publicly announced the currency pairs I trade. What’s nice about the chart above is that it’s divided Opening Range Breakout Trading Strategy into various time frames. This separation makes it easy to determine how one currency pair correlates to another and if you’re approach makes sense from a risk to reward perspective. At the same time, if you were to buy both currency pairs, you’ve contradicted yourself.

This how to buy guide will let you in on everything you need to know about buying, selling and trading BSV. AFEX offers fast transfers in all major currencies — but it’s not transparent about pricing. The bid price is the best available price at which Forex Majors & Minors Currencies we can sell to the market. However, when we are trading financial instruments such as currencies we are offered two slightly different prices. Currency pairs that do not contain the US Dollar are known as cross-currency pairs or simply “crosses”.

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This is because investors will tend to favor countries with higher interest rates than those with lower interest rates when they are deciding where to store their money. This is because with higher interest rates, an investor will receive a higher return for their initial capital. Forex Majors & Minors Currencies Similar to GBP/EUR or USD/CAD, EUR/CHF sees two closely-tied economies pitted against each other – the Swiss economy against and the eurozone. Like other CHF pairs in this article, EUR/CHF can be seen as a relatively stable pair due to Switzerland’s safe haven status.

Less frequently traded, yet still highly liquid, the currency pairs below are known as ‘Minors’ or ‘Crosses’. These pairings are made up of primary non-US Dollar based currencies. In the past, minors used to be converted in USD and later into the currency they desired. They are typically more volatile and less liquid compared to Major pairs. Expensive pairs would destroy your profit margin and, most often, they don’t move enough to qualify for intraday trading anyway.

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Majors are the most common currency pairs which are traded worldwide. It is a decentralized market, where currency pairs are being traded. Forex is considered to be the most liquid market compared to stocks or any other asset. It has a daily transaction volume of $5 trillion, which cannot be compared with other markets’ volume.

The base currency is to the left of the pair and the quote currency is to the right. These pairs are not traded as often as the majors or minors, so often the cost of trading these pairs can be higher than the majors or minors due to the lack of liquidity in these markets. Forex trading is essentially the buying of one currency and the simultaneous selling of another. Therefore when trading currencies we will always see them quoted in pairs.

An Overview Of The Major Forex Currency Pairs

For example, when trading the euro dollar (EUR/USD), if a trader thinks the euro will strengthen against the US dollar, they would place a buy trade. For every point or pip the euro rises against the dollar, they would make a profit. If the price of the euro rises against the US dollar, the trader would make a loss for every pip it falls. Because the major currency pairs are the most liquid and widely traded in the world they will likely have tighter spreads.

Author: Chauncey Alcorn