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.

The currency pairs that do not involve USD[9] are called cross currency pairs, such as GBP/JPY. Pairs that involve the euro are often called euro crosses, such as EUR/GBP. The most traded pairs of currencies in the world are called the Majors. They constitute the largest share of the foreign exchange market, about 85%,[5] and therefore they exhibit high market liquidity. There are also currency pairs that do not trade against the US dollar, which have the name cross-currency pairs.

These countries decided to keep the currency, even if the values were separate from one another. Get tight spreads, no hidden fees, access to 12,000 instruments and more. Get tight spreads, no hidden fees and access to pepperstone canada 10,000+ instruments. The five BRICS countries represent about 41% of the world’s population, 32% of global economic output (adjusted for purchasing power), and 20% of global goods exports.

The Most Commonly Traded Currency Pairs in the Forex Market by Volume

Considering whether they are negatively or positively correlated, or if they are likely to move in the same direction, opposite directions, or completely randomly could be useful. These are all things to take into consideration when trading on currency pairs. However, for an American trader, a EUR/USD quote is an indirect one. So, for example, a quote of 0.80 EUR/USD means that 1 EUR would cost you $0.80. If the pair appreciates to 1.00, the euro has increased in value because it now costs $1 to buy a euro. On the other hand, if the pair is quoted .75, the dollar is seeing strength because it now costs just $0.75 to buy a euro.

1. FX trading allows traders to speculate on all the major currency pairs.
2. These countries decided to keep the currency, even if the values were separate from one another.
3. There are as many currency pairs as there are currencies in the world.
4. The base currency is the one that a trader thinks will go up or down against the second currency in the pair.

All trading within the forex market, whether selling, buying, or trading, will take place through currency pairs. Trading currency pairs is conducted in the foreign exchange market, also known as the forex market. It is the largest and most liquid market in the financial world. This market allows for the buying, selling, exchanging, and speculation of currencies. It also enables the conversion of currencies for international trade and investment. The forex market is open 24 hours a day, five days a week (including most holidays), and sees a huge amount of trading volume.

Yen Crosses

A trader may buy the EUR/USD pair if they believe the euro will increase in value relative to the dollar. Buying the EUR/USD dollar pair can also be referred to as ‘going long’. Alternatively, a trader could sell the EUR/USD pair – also known as ‘going short’ – if they believe the value of the euro will go down relative to the dollar.

Major Currency Pairs

A wide spread between currencies indicates volatility, whereas a narrow spread means that there is a smaller difference between the bid and ask price. Most traders prefer a tighter or narrower spread, as it indicates lower volatility but high liquidity. Our forex trading page has a breakdown of all spreads and margins that we offer on our currency pairs. These are the least traded in the forex market, and are less liquid than the cross pairs.

Imagine each currency pair constantly in a “tug of war” with each currency on its own side of the rope. The rules for formulating standard currency pair notations result from accepted priorities attributed to each currency. The USD/CAD is affected by factors that influence the value of the U.S. and Canadian dollars, with each other and other currencies. For this reason, the interest rate differential between the Federal Reserve (Fed) and the Bank of Canada (BoC), will affect the value of these currencies. But then World War I happened, the gold standard was abandoned and the Scandinavian Monetary Union disbanded.

If a EUR/USD position is closed out with a profit in USD by a British bank, then the rate-to-base will be expressed as a GBP/USD rate. This ambiguity leads many market participants to use the expressions trade99 review currency 1 (CCY1) and currency 2 (CCY2), where one unit of CCY1 equals the quoted number of units of CCY2. Aside from the three main categories of currency pairs, there are other “groups” of currencies that are thrown around in the FX world that you should be aware of. An exchange rate is the relative price of two currencies from two different countries. It is useful to get a better understanding of currency correlations and gain an insight into the relationship between currency pairs.

How Can Traders Profit in Currency Pairs?

There is no definite ‘safest currency’ to trade, due to the liquidity and often volatility of the forex market. However, some currencies are stronger in value than others and can act as a safe haven for investors in times of instability. This is the rate at which you can buy a currency, and the rate at which you can sell a currency.

In a currency pair, one currency is the base currency and the other is the quote currency. The movement in major forex pairs is often more predictable within the FX market, due to the vast amount of knowledge and research that traders have collected over the years. All currency trading on the foreign exchange market occurs in pairs.

These pairs all contain the U.S. dollar (USD) on one side and are the most frequently traded. In 2016, however, oil prices slumped to decade-lows, trading below $30 a barrel. Consequently, the Canadian dollar hit a record low, trading at 1.46.