A currency pair is two different currencies, with one currency's value being quoted against another. The first listed currency is called the base currency, and the second is the quote currency. Liquidity and tight spreads are enticing as large trades can be made without causing major impacts on the market. The currency with the higher interest rates will see an increase in demand because higher interest rates give a better return on an initial investment. Economic growth drives the strength of currencies so in this case if the UK economy is growing at a faster rate than the US, the pound will strengthen against the dollar and vice versa.
The value of the Australian dollar is entwined with the value of its exports as raw materials such as iron and coal account for a significant amount of the country's GDP. With AUD reliant on these commodities, trading AUD can be profitable when the value of these goods is up as it strengthens the currency against the dollar.
The Canadian Dollar is strongly tied to commodities trading due to the fact that Canada is a large exporter of oil, minerals and grains. At certain times in history, this was the third most popular currency pair. Like Canada, Australia is a large exporter of commodities such as natural gas , coal, iron ore and agricultural products. In addition, it can be easier to research economic events and trends as they tend to be covered daily by news outlets and talked about on social media.
If you want to test your trading strategy with popular Forex pairs, try our free demo account which includes live market quotes and a range of Forex trading indicators. Forex trading does come with a large element of risk and you need to be careful. This article contains general information which doesn't take into account your personal circumstances. This means that Forex pairs that were once strong can depreciate following economic changes. However, there are some currency pairs whose value tends to remain stable or appreciated during times of economic instability.
While they are considered safe-haven currencies it should be noted that even safe-havens have the tendency to depreciate at times, and so traders should not completely rely on them. This is because such currencies often retain their value or even climb higher as the market tumbles. In the trading world, in general, safe havens also refer to currencies , commodities , and stocks. For example, Gold is considered a safe-haven commodity to trade as it has a long-term value. Most Popular Forex Pairs Some currency pairs are more liquid than others, which in theory makes them easier to trade.
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Conversely, when you sell the currency pair, you sell the base currency and receive the quote currency. Currency pairs are quoted based on their bid buy and ask prices sell. The bid price is the price that the forex broker will buy the base currency from you in exchange for the quote or counter currency. The ask—also called the offer—is the price that the broker will sell you the base currency in exchange for the quote or counter currency.
When trading currencies, you're selling one currency to buy another. Conversely, when trading commodities or stocks, you're using cash to buy a unit of that commodity or a number of shares of a particular stock. Economic data relating to currency pairs, such as interest rates and economic growth or gross domestic product GDP , affect the prices of a trading pair. A widely traded currency pair is the euro against the U.
In fact, it is the most liquid currency pair in the world because it is the most heavily traded. This means that 1 euro can be exchanged for 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 volume that is traded on a daily basis for a pair.
The currencies that trade the most volume against the U. The final two currency pairs are known as commodity currencies because both Canada and Australia are rich in commodities and both countries are affected by their prices.
The major currency pairs tend to have the most liquid markets and trade 24 hours a day Monday through Thursday. The currency markets open on Sunday night and close on Friday at 5 p. Eastern time. 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 currency pairs include currencies of emerging markets. These pairs are not as liquid, and the spreads are much wider. Bank for International Settlements. Accessed Feb. Your Money. Personal Finance. Your Practice. Popular Courses. Table of Contents Expand. Table of Contents. What Is a Currency Pair? Understanding Currency Pairs.
Major Currency Pairs. Minors and Exotic Pairs. Part of. Part Of. Therefore, if you are a trader who does not like being in the position of taking too much risk, this might be one of your best options for trading Forex. All the Forex majors that can be found are equipped with tight spreads. It is perhaps better to avoid those pairs which have high spreads. The recommended spread by the trading experts tends to be around pips.
When it exceeds 6 pips, trading may become too expensive, which can lead to greater losses. Still, it doesn't mean that you should totally avoid anything which has a high spread. The best way to trade sensibly and effectively in this regard would be to exercise proper risk management within your trading to help minimise the risks of trading. As we saw above, the major Forex pairs consist of the most heavily traded currencies and all include the US dollar.
Minor Forex pairs, also known as cross currency pairs, are pairs that do not include the US dollar. These pairs have wider spreads and less liquidity than the major pairs, however, they still have sufficient liquidity for trading. Examples of minor pairs include:.
Then there are the exotic currency pairs, which include the currencies from emerging economies. Exotic pairs are the least liquid and also tend to have the largest spreads. Examples of these exotic pairs include:. If you're interested in trading these currencies but aren't ready to risk your funds yet on the live market, there's no better place to start than with a free access Admirals demo trading account.
Instead of heading straight to the live markets and putting your capital at risk, you can avoid the risk altogether and simply practice until you are ready to transition to live trading. Take control of your trading experience, click the banner below to open your demo account:. Just like any other skill, becoming successful at trading takes time and plenty of practice. To master this skill you need to have a lot of patience, discipline, but most of all you need to be passionate about the industry.
Successful trading starts with having a trading plan that is based on either Technical or Fundamental analysis. Technical analysis looks at price charts of a financial instrument, using technical indicators or price action to attempt to predict future movements in price.
Whereas, fundamental analysis attempts to predict price movements based on macro economical data and news releases. There are many different ways you can learn currency trading online as there are a lot of different education providers. To start learning for free with Admirals we suggest heading over to our "Forex Strategy" section in our Articles and Tutorials education portal to learn different trading strategies.
It's time to briefly detail the Forex trading sessions along with the currency pairs I have just discussed. Understanding the Forex trading sessions will also strengthen your trading strategy. The Forex markets are open 24 hours a day during the week, except on holidays. However, the market isn't dominated by one market. Instead, there is a global network of brokers and exchanges and brokers around the world.
The Forex trading hours are based on the market opening hours of each participating country. Although a hour Forex market offers many opportunities for both individual and institutional traders , since it guarantees liquidity and a reliable opportunity to enter and exit trades at any possible time within the Forex trading hours, it still has its pitfalls for traders.
While you can trade different currencies anytime you wish, you can't monitor your position for long periods of time. This means that there are Forex trading times in which traders miss opportunities, or worse, there is a spike in market volatility that leads the spot to move against a position when you're not nearby.
To reduce such risks, you have to learn when the markets are most likely to be volatile, and therefore decide what times are best for their individual trading strategy and style. If you look at these hours, you may notice that there is a pattern that generally follows: as one major Forex market closes, there is another one that has opened. There are specific times in which the markets are more active and times when they are less active. All traders need to keep track of the different levels of activity throughout the trading sessions.
Next, I'm going to briefly discuss these periods and the times that traders generally consider the best and worst times to trade. When there is low liquidity, which usually occurs when markets open, and at around 12am, there is substantial risk for trading. Low liquidity can bring about higher volatility than traders see during common trading hours.
Professional traders don't recommend entering trades any time from am. These high-risk periods can put your account at risk. Typically, professional traders see the first three hours of a major trading session as having the best momentum, trend, and retracement. It is during these hours that traders seem to find the best opportunities.
Do you want to learn more about trading hours? You can find more in-depth information in our full article on this topic here:. Many factors can make or break you as a trader, such as having a clearly written trading plan and following it. This indicates that you know exactly what your entry and exit points are and that you know what you are looking for.
Trading involves a lot of psychology and can be a lot harder to manage without a proper plan. The key is to minimise the psychological effect that our emotions might have on our performance. Apart from the mental side, it is very important to have a broker and platform that you can trust.
The MetaTrader trading platforms are widely regarding as some of the best Forex trading platforms. These platforms are the most used in the world and come equipped with a whole range of useful technical indicators to help with chart analysis. Admirals offers free access to both the MetaTrader trading platforms. Aside from this, we offer other useful tools, such as the Trading Calculator.
Since risk management is a key factor in trading and it's nearly impossible to calculate the correct lot size since every pair has a different pip value, the trading calculator can be a very important tool for a trader. Generally speaking, the best pair for you to trade is the one that you are most knowledgeable about. A useful way to keep track of economic announcements which might affect the value of a currency is with our currency exchange rate Forex trading calendar , where you can also find predictions and forecasts concerning announcements.
With a Forex trading calendar, you can find predictions about potential currency-related events that may influence the Forex markets. The dynamics of Forex trading is an interesting subject to study. As globalisation becomes a bigger, more pressing issue for most countries around the world, the fate of their currencies is closely interconnected.
Make sure you study the foreign exchange market extensively before investing. There are many Forex pairs available for trading and it is highly recommended to try trading most of them before you choose a particular one to stick with. As Forex trading is risky, you should try it first on a Demo account with virtual currency so you can practice before risking your own capital. If you want to start trading Forex or investing in thousands of other markets, MetaTrader 5 is commonly regarded as one of the best available platforms for doing so.
It is available on desktop, a web terminal and as a mobile app, which makes it a convenient forex currency trading app as well. Traders can easily track the movement of currency rates and a wide range of other financial assets, such as CFDs on stocks, commodities and stock indices, to name a few.
The following articles may be of interest to you. Discover some people who have become wealthy trading Forex and discover different trading and risk management strategies that are essential for any trader to minimize losses and maximize potential profits:. This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments.
Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.
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7 major forex pairs · The euro and US dollar: EUR/USD · The US dollar and Japanese yen: USD/JPY · The British pound sterling and US dollar: GBP/USD · The US dollar. Currency pairs explained A currency pair is a quotation for two different currencies. It is the amount you would pay in one currency for a unit of another. What is a currency pair in forex? A currency pair is a pairing of currencies where the value of one is relative to the other. For example, GBP/USD is the value.