Currency Pair

  • A currency pair is made of up two currencies traded in the forex market

  • All currency pairs are quoted in terms of one currency versus another

  • Each currency pair has a ‘base’, which is the first denoted currency, and a ‘counter’ which is the second denoted currency

  • Each currency could strengthen (appreciate) or weaken (depreciate). As there are two currencies in each pair, there are essentially four variables you are speculating on when it comes to currency pairs

  • There are major currency pairs and minor/exotic currency pairs

All forex pairs are quoted in terms of one currency versus another. Each currency pair has a base which is the first denoted currency, and a counter which is the second.

When you place a trade on a currency pair, you’re essentially buying one currency and selling another - but in a single transaction. So for example, going long or ‘buying’ EUR/USD means you’re buying the Euro and selling the US dollar. Going short means that you’re ‘selling’ the Euro and buying the US dollar.

Currency values rise (appreciate) and fall (depreciate) against each other due to a number of economic, geopolitical and technical factors and the forex market is the most traded in the world, with an average turnover in excess of $5 trillion a day. This makes it a highly volatile market and it’s available to trade on 24 hours a day, five days a week (Monday to Friday).

What are the major currency pairs?

Major currency pairs are the most traded currency pairs in the world and it is estimated that trading on those currencies represents over 80% of the whole foreign exchange market. Those currency pairs are: EURUSD, GBPUSD, USDCHF, USDJPY, AUDUSD, NZDUSD and USDCAD.

Out of all the majors, the EURUSD is the most liquid currency pair; meaning that it is the most traded currency pair in the world.

You can check all the currency pairs that you can trade on with XTB here.

 

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