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What Are Forex Currency Pairs

Now that we have taken a good look at What is Forex, Training, Software, Trading Times and Analysis, we need to understand what it is that we are actually trading. We should by now have understood that we are Trading Money. Now we need to understand how that money is displayed in a typical foreign exchange market.

Currency is generally an accepted form of money, including coins and paper notes, which is issued by a government and circulated within an economy. Used as a medium of exchange for goods and services, currency is the basis for trade.

When you trade forex, you will be trading a currency pair for example the GBP/USD. Directly put, 'What is the value of the GBP against the USD?' One currency normally has a greater value than the other. This is mostly reflected by a countries economic status. In the above example, the GBP is called the base currency and USD is called the quote currency.

The Bid (buy price) represents how much of the quote currency is needed for you 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. So in the above example, the bid or buy price represents how many USD are needed to buy one unit of the GBP. The ask or sell price represents how many USD you will pocket for selling one GBP unit.

In previous articles, I mentioned go long and go short without properly explaining. That is what It basically means to go long or go short on a currency pair.

In the above, you would buy the currency pair (go long) if you thought the GBP was going to gain value against the USD. Conversely you would sell the pair (go short) if you believed the GBP was going to lose value against the USD.

Forex Jargon 102:

Traders buying currencies are referred to as Bulls. Traders Selling currencies are referred to as Bears.

Buy = Go Long (Bulls) (Bullish Market when price is going up) i.e. There are many Bulls for the GBP/USD pair today, meaning the price is going up. There are a lot of traders buying the GBP/USD pair and the forex chart is displaying the value of the GBP against the USD going up up and up.

Sell = Go Short (Bears) (Bearish Market when price goes down) .i.e. There are many Bears for the GBP/USD today meaning the pound price is depreciating against the dollar. It's time to join the party and sell the GBP/USD for some green. Green = Profit.

The Bid (buy Price for the broker) is normally lower than the Ask (sell Price for the broker). Bid on the left Ask on the Right. The ask price is also refereed to as the offer price. The broker or bank always buys currency at a cheaper price than they sell it. That is how they make their margin. Your broker offers the ask price, so in the above example the asking price for a trader to buy the GBP would be the value quoted on the right side. You will then Buy the GBP for 2.0466 from the broker and if you wish to sell the GBP you would sell it for 2.0463 to the broker.

If the Trader bought the GBP/USD pair @ 2.0466, they would have to wait for the value to go up and above 2.0466 in order to sell the pair for a profit. If the price remains exactly the same, they would have to sell it at a loss, because the broker will always buy at a lower price. So if the value stays the same or lowers you will be losing money if you had bought the pair. The same applies if you sold the pair and the price went up instead.

Simple when you know how.

Currency quotations use the abbreviations for currencies that are prescribed by the International Organization for Standardization (ISO). For example the major US Dollar is abbreviated as (USD). Currency Symbols always have three letters. The first two identify the country and the third the currency.

Major Fx Currencies

All currencies and pairs normally have a Nickname.The Term on far right is the currency or pair Nickname. For example, the US Dollar is nicknamed Buck. These Nicknames vary from trading centers in New York, London and Tokyo.

The major currencies and their designation in the foreign exchange market are:

USD	USA	Dollar	Buck
EUR	Euro Zone	Euro	Fiber
JPY	Japan	Yen	Yen
GBP	United Kingdom	Pound	Cable
CHF	Switzerland	Franc	Swissy
CAD	Canada	Dollar	Loonie
AUD	Australia	Dollar	Aussie
NZD	New Zealand	Dollar	Kiwi

Other currencies are classed as Minor Currencies and they are normally traded against a Major Currency.

Major Fx Currency Pairs

Majority of Fx Traders will be trading the Major Currency Pairs i.e. 'The Big Dogs.' These majors constitute the largest market share around 85% and therefore possess excellent liquidity. The major currency pairs also all contain the USD on one side. These are:

EUR/USD	Euro / US Dollar	Euro Dollar
USD/JPY	US Dollar / Japanese Yen	Dollar Yen
GBP/USD	Sterling Pound / Us Dollar	Pound Dollar
USD/CHF	US Dollar / Swiss Franc	Dollar Swissy
USD/CAD	US Dollar / Canadian Dollar	Dollar Loonie
AUD/USD	Australian Dollar / US Dollar	Aussie Dollar
NZD/USD	New Zealand Dollar / US Dollar	Kiwi Dollar

Minor Fx Currency Pairs

Minor Currency Pairs or Major Crosses are pairs that do not involve the US Dollar such as GBP/JPY. Pairs that involve the Euro are often called Euro crosses, such as EUR/GBP. There are many local sites providing these types of local currency crosses. Below are examples of the Major Crosses:-

Euro Crosses

EUR/CHF	Euro / Swiss Franc	Euro Swissy
EUR/GBP	Euro / Sterling Pound	Euro Pound
EUR/CAD	Euro / Canadian Dollar	Euro Loonie
EUR/AUD	Euro / Australian Dollar	Euro Aussie
EUR/NZD	Euro / New Zealand Dollar	Euro Kiwi

Yen Crosses

EUR/JPY	Euro / Japanese Yen	Euro Yen / Yuppy
GBP/JPY	Sterling Pound / Japanese Yen	Pound Yen / Guppy
CHF/JPY	Swiss Franc / Japanese Yen	Swissy Yen
CAD/JPY	Canadian Dollar / Japanese Yen	Loonie Yen
AUD/JPY	Australian Dollar / Japanese Yen	Aussie Yen
NZD/JPY	New Zealand Dollar / Japanese Yen	Kiwi Yen

Pound Crosses

GBP/CHF	Sterling Pound / Swiss Franc	Pound Swissy
GBP/AUD	Sterling Pound / Australian Dollar	Pound Aussie
GBP/CAD	Sterling Pound / Canadian Dollar	Pound Loonie
GBP/NZD	Sterling Pound / New Zealand Dollar	Pound Kiwi

Aussie Crosses

AUD/CHF	Australian Dollar / Swiss Franc	Aussie Swissy
AUD/CAD	Australian Dollar / Canadian Dollar	Aussie Loonie
AUD/NZD	Australian Dollar / New Zealand Dollar	Aussie Kiwi

Other Crosses

CAD/CHF	Canadian Dollar / Swiss Franc	Loonie Swissy
NZD/CHF	New Zealand Dollar / Swiss Franc	Kiwi Swissy
NZD/CAD	New Zealand Dollar / Canadian Dollar	Kiwi Loonie

Exotic Currency Pairs

Exotic Currency Pairs are currency pairs that are not common in the Foreign Exchange Market. Exotic currency is usually from developing countries such as parts of Asia, the Pacific, the Middle East and Africa. These often have huge spreads between the ask and the sell price. In comparing an exotic pair USD/ZAR to the popular major EUR/USD pair, the difference in spreads is about 200%.

Exotic currencies are neither major nor minor, but they are still important in the Forex Market.

EUR/TRY	Euro / Turkish Lira
USD/TRY	US Dollar / Turkish Lira
USD/SEK	US Dollar / Swedish Krona
USD/NOK	US Dollar / Norwegian Krone
USD/DKK	US Dollar / Danish Krone
USD/ZAR	US Dollar / South African Rand
USD/HKD	US Dollar / Hong Kong Dollar
USD/SGD	US Dollar / Singapore Dollar
USD/THB	US Dollar / Thailand Baht
USD/MXN	US Dollar / Mexican Peso

Note: the exotics are not the best place to begin as a trader. Start with the majors and crosses first. This is some great advice for a newbie.