Friday, 3 March 2017

what is a Forex currency pair

                                     what is a Forex currency pair

Forex Currency is always traded in pairs, one pair being traded against another. The pairs are set in a certain format which is consistent throughout the 100's of pairs that are available and each currency has its own individual symbol. The first currency in the pair is the base currency and will always represent a single denomination of that currency.

To make this more clear we are going to look at the GBP/USD. GBP is the symbol for Great British Pounds and the USD is the symbol for the United States Dollar. As you can see the GBP is the first in the currency pair so this will be represented as 1 single Pound and will not change. The USD however, is the second currency in the pair and therefore the fluctuating currency.

Whenever you see the GBP/USD represented as a price it is the price in dollars that the GBP is worth. For example, if the price is 16200 it is telling you that 1 GBP is worth 16200 USD or $1.6200. The last two decimal places are known as pips and are important denominations to forex traders, but that is a topic for another article.

The forex currency pairs are broken down into sections so it is easy for people to find the most popular. The 3 different bands of currency pairs are Major, Minor and exotic. The major pairs will be currencies that you are more familiar with such as the Australian Dollar, Euro, United States Dollar, Swiss Franc, Japanese Yen, Canadian Dollar and Great British Pounds. These currencies are represented respectively as AUD, EUR, USD, CHF, JPY, CAD and GBP which make up the basis of the major currency trading pairs.

As discussed above these currencies are always paired up against one another in a set format and in the major class always include the USD as one of the pair. Although the symbols can be paired up against one another they would fall into the class of minor unless, being traded against the USD.

One of the currency pairs that is disputed to be major or minor and the only one that does not include the USD is the EUR/GBP. You will find some traders arguing that it is a major currency pair but you will find most spread betting platforms class it as a minor currency pairs.

The most traded of the 6 major currency pairs are the GBP/USD and the EUR/USD. Because of the volume of traders buying and selling this currency it also makes them the most profitable and the most volatile. It is important to receive proper training before taking on the task of forex trading.


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