A currency pair is a price quote of the exchange rate for two different currencies traded in the foreign exchange market.
Forex trading is the simultaneous buying of one currency and selling another.
When you trade in the forex market, you buy or sell in currency pairs.
Each currency in the pair is listed as a three-letter code.
The first two letters identify the name of the country and the third letter identifies the name of that country’s currency, usually the first letter of the currency’s name.
For example, USD stands for the US dollar and CAD for the Canadian dollar
In the USD/CAD pair, you arebuying the U.S. dollar by selling the Canadian dollar.
The first currency listed in a currency pair is called thebase currency, and the second currency is called thequote currency.
The quote currency is also known as the “counter currency”.
Currency pairs compare the value of one currency to another.It indicates how much of the quote currency is needed to purchase one unit of the base currency.
The price of a currency pair is how much one unit of thebase currencyis worth in thequote currency.
For example, for the currency “EUR/USD”,EUR is the base currency and USD is thequote currency.
If EUR/USD is trading at 1.0950, then one euro is worth1.0950 U.S. dollars.
If the euro appreciates against the dollar, then a single euro will be worth more dollars and the pair’s price will rise.
If the euro depreciates against the dollar, the pair’s price will fall.
If you think that the base currency in a pair is likely to strengthen against the quote currency, you can enter a long position (“buy the pair”).
If you think it will weaken, you can enter a short(“sell the pair”).
Learn more aboutcurrency pairsand the different types like the “Majors” and “Minors”.
You can see a long list of currencies that trade against the USD here.
FAQs
The first listed currency within a currency pair is called the base, while the second currency that is the benchmark is called the quote. Currency pairs are meant to be compared against one another in order to understand how much of the quote currency is required to buy one unit of the base currency.
Which currency pair is best to trade? ›
EUR/USD (nicknamed fibre) has the highest trading volume among all currency pairs in the Forex market. Traders can invest in the largest economies with this pair, the American and European economies.
Should you focus on one currency pair? ›
Trading only one forex pair can limit your opportunities and expose you to unnecessary risk. Here are several reasons why diversifying your forex trading beyond just one pair is advisable: Market Volatility: Different currency pairs exhibit varying levels of volatility at different times.
What is the hardest currency pair to trade? ›
The 10 most volatile forex pairs
- NZD/USD. ...
- USD/MXN. ...
- GBP/USD. ...
- USD/JPY. ...
- USD/CHF. ...
- EUR/USD. ...
- USD/CAD. ...
- USD/SGD. The least volatile currency pair in the top 10 is USD/SGD, which has averaged less than 4% over the last few years.
What is the meaning of currency pair? ›
Key Takeaways. A currency pair is a price quote of the exchange rate for two different currencies traded in FX markets. When an order is placed for a currency pair, the first listed currency or base currency is bought while the second listed currency in a currency pair or quote currency is sold.
What is the currency quote? ›
The quote currency quoted expresses the number of units of that currency that are equal to one unit of the base currency. For example, if the EUR-USD is quoted at 1.25, EUR is the base currency, and USD is the quote currency. It means, in this example, that one EUR is worth 1.25 USD.
What pairs move 100 pips a day? ›
Historically, the AUD/USD pair has an average daily pip movement of approximately 70-100 pips and typically experiences an average monthly pip movement of around 600-900 pips However, economic data releases, commodity price fluctuations (especially related to iron ore and coal), or shifts in market sentiment can ...
Which currency pair is the most profitable? ›
Top Forex Currency Pairs
- EUR/USD (Euro/US dollar)
- USD/JPY (US dollar/Japanese yen)
- GBP/USD (British pound/US dollar)
- AUD/USD (Australian dollar/US dollar)
- USD/CHF (US dollar/Swiss franc)
- USD/CAD (US dollar/Canadian dollar)
What is the safest currency pairs to trade? ›
The least volatile and thus the most stable forex pairs are majors: EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD, GBP/JPY, EUR/JPY, and USD/CAD.
Are currency pairs manipulated? ›
Their ability to decide what currency pairings to distribute and what bid-ask prices to set allows them to heavily influence specific sectors and tip the scales in their favour. So, while many regulations are set to prevent it, market makers manipulate forex through various means to increase their profitability.
The forex market runs on the normal business hours of four different parts of the world and their respective time zones. The U.S./London markets overlap (8 a.m. to noon EST) has the heaviest volume of trading and is best for trading opportunities.
How many pairs should I trade as a day trader? ›
If you're just starting out, try to focus on 5 to 10 currency pairs. This will give you a few quality opportunities each month without it becoming overwhelming. By maintaining a list this size, you'll have more time to study and learn the process of becoming successful.
Which currency pair is easiest trading? ›
GBP and USD are the two most popular and liquid major currencies in the world. Thanks to its tight spreads and limited fluctuations, the GBP/USD is an ideal currency pair for beginner traders. Also, it is less volatile than most other so it is less risky for beginners.
Which currency pair should I trade now? ›
Frequently Asked Questions About Forex Currency Pairs
The EUR / USD is actually the best currency to trade, its the most liquid and cheap to trade and most of the moves are quite logical in a way, the EURUSD currency pair often has a negative correlation with USD / CHF and a positive correlation with GBP / USD.
Which currency pair moves the least? ›
The least volatile currency pairs include USD/CHF, USD/JPY, EUR/CHF, and USD/EUR. The movement in the price of these pairs is often tiny because both currencies in the pair often move in the same direction.
What is a direct quote currency pair? ›
Direct quotation is where the cost of one unit of foreign currency is given in units of local currency, whereas indirect quotation is where the cost of one unit of local currency is given in units of foreign currency.
What is the Kraken quote currency? ›
The Cost minimum order size goes by quote currency. The quote currency is the right or the second currency in a currency pair. For example, in the currency pair BTC/USD, USD is the quote currency. If an order does not satisfy the cost minimum, it will be canceled and you will see the error, Cost minimum not met.
What is the difference between quote currency and term currency? ›
The term base currency refers to the first currency that appears in a currency pair. In the foreign exchange market, currency unit prices are quoted as currency pairs. The base currency is normally considered the domestic currency and is followed by the quote currency or the counter currency in the pair.
What is the USD try currency pair? ›
Convert US Dollar to Turkish Lira
USD | TRY |
---|
1 USD | 34.0453 TRY |
5 USD | 170.227 TRY |
10 USD | 340.453 TRY |
25 USD | 851.133 TRY |
6 more rows