The Ultimate Guide to Currency Pairs in Forex Trading

1. The Ultimate Guide to Currency Pairs in Forex Trading

2. Introduction • Forex Trading is currency trading, where buying, selling, and exchange of currency pairs take place to make profitable returns. • Therefore, currency pairs are crucial to forex trading and every forex trader should be familiar with currency pairs, their types, working, and how they are traded in the forex market for earning profits. 

4. What are currency pairs and how do they work?  • A currency pair is a combination of two foreign currencies. Example: US dollar and UK’s Euro (USD/EUR). So, here’s how a currency pair works in forex trade. A currency pair consists of two currencies and their quotations. • Among the two currencies, the value of one currency is quoted against the other currency. The first currency that is listed is called the base currency and the second currency is known as the quote currency.

5. The values of both these currencies (base currency and quote currency) are compared to find out the amount of quote currency needed to buy a unit of base currency. • Learn forex trading from a reputed and experienced institute to get detailed insights on currency pairs and other important forex concepts. 

6. Every currency comes with a code called an ISO currency code. The ISO currency code of the US dollar is USD. Similarly, every currency has its own code. When a currency pair is traded, it will appear in this format - USD/EUR. • There are different types of currency pairs. Some are popular, widely traded and come with high liquidity, while some currency pairs are least traded and come with low liquidity. 

7. Types of Currency Pairs There are 3 prominent types of currency pairs.  • Major currency pairs  • Minor currency pairs • Exotic currency pairs 

8. Major currency pairs are currency pairs that are traded against the US dollar and are traded in high volumes in forex trading. When currency pairs are traded in high volumes, they have small spreads and high liquidity, which are advantageous for the traders. • This is why most beginner traders and even advanced traders prefer to trade major currency pairs. Example for major currency pairs: EUR/USD, USD/CHF, USD/CAD, GBP/USD, USD/JPY, etc. 

9. Minor currency pairs are currency pairs that do not include the US dollar. These are also called the crosses. These are traded in lesser volume compared to the major currency pairs. They also have wider spreads and quite low liquidity. • Exotic currency pairs are rare currency pairs that are not popularly traded in the forex market. These currency pairs are slowly emerging in the market and come with wider spreads. The price movements of exotic currency pairs are difficult to predict.  

10. Traders rarely choose exotic pairs to trade as they come with poor liquidity and high risk factors. To learn about currency pairs in a much more detailed manner, students or traders can opt for a forex trading course. In forex trading, currency pairs are continuously bought, sold, exchanged and speculated in order to execute trades and make profits. While purchasing a currency pair, a trader will buy the base currency and sell the quote currency.

11. Similarly, when a trader sells a currency pair, the base currency will be sold and quote currency will be bought. In short, one currency is always sold to purchase another currency in forex trading.  Factors such as the GDP, economic scenarios in a country, interest rates, and federal reserve actions may influence currency pairs. Join the best forex trading class now to learn more about every aspect of trading in detail. Investment in a course comes with lifelong benefits, as the trader will get a strong idea about all the forex concepts in a clear manner to engage in trading.  

12. To Redefine Your Life, Join Us And Learn Forex Trading with The Fido Academy https://thefidoacademy.com/ +91-8248464994 info@thefidoacademy.com

13. Thank You