Understanding currency pairs forex trading

Understanding currency pairs forex trading

Author: torin Date: 24.05.2017

A currency pair is the quotation and pricing structure of the currencies traded in the forex market; the value of a currency is a rate and is determined by its comparison to another currency.

The first listed currency of a currency pair is called the base currency, and the second currency is called the quote currency.

The currency pair indicates how much of the quote currency is needed to purchase one unit of the base currency. If you buy a currency pair, you buy the base currency and implicitly sell the quoted currency.

The bid buy price represents how much of the quote currency you need to get one unit of the base currency. Conversely, when you sell the currency pair, you sell the base currency and receive the quote currency. The ask sell price for the currency pair represents how much you will get in the quote currency for selling one unit of base currency.

If you sold the currency pair, you would receive 1. There are as many currency pairs as there are currencies in the world. The total number of currency pairs that exist changes as currencies come and go.

All currency pairs are categorized according to the amount of volume that is traded on a daily basis for a pair. The currencies that trade the most volume against the U. All of the major currency pairs have very liquid markets that trade 24 hours a day every business day, and they have very narrow spreads. Currency pairs that are not associated with the U. These pairs have slightly wider spreads and are not as liquid as the majors, but they are sufficiently liquid markets nonetheless.

The crosses that trade the most volume are among the currency pairs in which the individual currencies are also majors. Exotic currencies pairs include currencies of emerging markets.

understanding currency pairs forex trading

These pairs are not as liquid, and the spreads are much wider. Dictionary Term Of The Day.

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understanding currency pairs forex trading

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