Loading ...
What Are Forex Currency Pairs?
In forex trading, currencies are always traded in pairs. This means that when you buy one currency, you're selling another. Think of each currency pair as a single financial unit that can be bought or sold. For example, popular pairs like the euro/US dollar (EUR/USD) or British pound/Japanese yen (GBP/JPY) are widely traded.
Understanding Currency Pairs
Currency pairs consist of two components: the base currency and the quote currency. The base currency is the first in the pair and represents what you're buying or selling, while the quote currency is what you’re comparing it to.
For instance, in the EUR/USD pair, the euro is the base currency and the US dollar is the quote currency. If the rate is 1.3560/1.3562, it means you’ll need 1.3562 USD to buy one euro, and if you sell one euro, you’ll get 1.3560 USD in return.
How Do Traders Use Currency Pairs?
If you believe the euro will strengthen against the US dollar, you would buy the EUR/USD pair, a strategy known as “going long.” Conversely, if you expect the euro to weaken, you would sell the EUR/USD pair, or "go short."
The 7 Major Forex Pairs
The major forex pairs are the most widely traded and all include the US dollar (USD). These pairs account for roughly 75% of all trades in the forex market and include:
- EUR/USD – Euro/US Dollar
- USD/JPY – US Dollar/Japanese Yen
- GBP/USD – British Pound/US Dollar
- USD/CHF – US Dollar/Swiss Franc
- AUD/USD – Australian Dollar/US Dollar
- USD/CAD – US Dollar/Canadian Dollar
- NZD/USD – New Zealand Dollar/US Dollar
Because of their high trading volume, these pairs typically have tighter bid-ask spreads, making them cost-efficient for traders.
Forex Liquidity and Pips
Forex is a highly liquid market, with participants trading 24 hours a day, five days a week. A pip, or “percentage in point,” is the smallest price movement in currency trading. For instance, if EUR/USD moves from 1.0630 to 1.0631, that’s a movement of one pip. The pip value helps traders determine potential profits or losses.
Major Currency Pairs: High Volume, Lower Spreads
The major currency pairs are the most traded because of their liquidity. With high demand, these pairs typically offer smaller bid-ask spreads, meaning lower transaction costs and better trading conditions.
Correlations in Forex Pairs
Forex pairs often exhibit correlations, meaning that the price movements of one pair may influence others. For example, if you’re trading EUR/JPY, you’re indirectly trading a combination of EUR/USD and USD/JPY. Understanding these correlations can help manage your portfolio and better predict market movements.
The Benefits of Trading Major Forex Pairs
Major forex pairs are attractive to traders due to their high liquidity and tight spreads. This results in more cost-effective trades and fewer sudden price swings. Plus, because these currencies are from stable economies, they’re less likely to experience extreme fluctuations compared to more exotic pairs.
Conclusion
The seven major forex pairs dominate the market and offer traders the best opportunities thanks to their liquidity, stability, and low spreads. By understanding how these pairs work, you can make more informed trading decisions and increase your chances of success in the forex market.
Century Financial Consultancy LLC (CFC) is duly licensed and regulated by the Securities and Commodities Authority of UAE (SCA) under license numbers 2020000028 and 2020000081, to practice the activities of Trading broker in the international markets, Trading broker of the Over-The-Counter (OTC) derivatives and currencies in the spot market, Introduction, Financial Consultation and Financial Analysis, and Promotion. CFC is a Limited Liability Company incorporated under the laws of the UAE and registered with the Department of Economic Development of Dubai (registration number 768189).
CFC may provide research reports, analysis, opinions, forecasts, or information (collectively referred to as Information) through CFC’s Websites, or third-party websites, or in any of its newsletters, marketing materials, social media, individual and company e-mails, print and digital media, WhatsApp, SMS or other messaging services, letters, and presentations, individual conversations, lectures (including seminars/webinars) or in any other form of verbal or written communication (collectively referred to as Publications).
Any Information provided in this publication is provided only for marketing, educational and/or informational purposes. Under no circumstances is any Information meant to be construed as an offer, recommendation, advice, or solicitation to buy or sell trading positions, securities, or other financial products. CFC makes no representation or warranty as to the accuracy or completeness of any report or statistical data made in or in connection with this Publication and accepts no responsibility whatsoever for any loss or damage caused by any act or omission taken as a result of the use of the Information.
Please refer to the full risk disclosure mentioned on our website.
Ready to Invest?
Explore a new trading experience with
Century Trader App
Losses can exceed your deposits
Ready to Invest?
Explore a new trading experience with
Century Trader App
Losses can exceed your deposits
Regulated by SCA
Century Financial Consultancy LLC
Reach us:
-
Dubai
6th Floor, Emaar Square Building 4,
Downtown, Dubai, P.O. Box 65777,
Dubai, United Arab Emirates -
Abu Dhabi
27th Floor, Office 2701,
Shining Towers, Abu Dhabi, UAE - +971 (4) 356 2800
- info@century.ae
Disclaimer: Trading in financial products carries risk. Trading in leveraged Over-The-Counter (OTC) Derivative products (including Contracts for Difference (CFDs) and spot foreign exchange contracts) involves a significant risk of loss which can exceed deposits and may not be suitable for all investors. OTC Derivative products / CFDs are complex financial instruments that do not confer any claim or right to the underlying financial instrument. Transactions in these instruments are very risky, and you should trade only with the capital you can afford to lose. Before deciding to trade on these products, you should consider your investment objectives, risk tolerance and your level of experience. Accordingly, you should ensure that you understand the risks involved and seek independent advice from professionals, if necessary.
Century Financial Consultancy LLC (CFC) is duly licensed and regulated by the Securities and Commodities Authority of UAE (SCA) under license numbers 20200000028 and, 20200000081 to practice the activities of Trading broker in the international markets, Trading broker of the OTC derivatives and currencies in the spot market, Introduction, Financial Consultation and Financial Analysis, and Promotion. CFC is a Limited Liability Company incorporated under the laws of UAE and registered with the Department of Economic Development of Dubai (registration number 768189). CFC has its registered office at 601, Level 6, Building no. 4, Emaar Square, Downtown, Dubai, UAE, PO Box 65777.
Any content available on our website is presented solely to provide information and educate visitors. Under no circumstances is any of this content meant to be construed as an offer, recommendation, advice, or solicitation to buy or sell securities or other financial products.
This website's information is not intended for use by anybody residing outside UAE or where such use would violate local laws or regulations.
