It is the quotation of two different currencies in the forex exchange market where the value of one currency is quoted against the other. Each pair consists of two different currencies. The first currency of the pair is called the “Base Currency”, while the second currency is called the “Quote Currency” or “Counter Currency”, e.g. EUR/USD, etc, where EUR is called based currency and USD is called quote currency.
In the foreign exchange market, one currency exchanged for another. For example, the quotation for EUR/USD is 1.1400. It means that one Euro is exchanged for 1.1400 US dollars. In the foreign exchange market, there are numbers of currency pairs. All the forex currencies are abbreviated with a symbol of three letters e.g. Euro is abbreviated with EUR. Similarly, the US dollar is abbreviated with USD.
Major Forex Currency Pairs:
The currency pairs which most traded in the world are called the “Major Currency Pairs”. These currency pairs consist of the US dollar and have the largest share of the foreign exchange market. Following is the list of major forex currency pairs used in forex trading.
|2||Great British Pound/US Dollar||GBP/USD||Cable|
|3||US Dollar/Japanese Yen||USD/JPY||Yen|
|4||US Dollar/Swiss Franc||USD/CHF||Swissy|
|5||US Dollar/Canadian Dollar||USD/CAD||Loonie|
|6||Australian Dollar/US Dollar||AUD/USD||Aussie|
|7||New Zealand Dollar/US Dollar||NZD/USD||Kiwi|
Minor Forex Currency Pairs:
All other currencies combination which has fewer shares in the foreign exchange market is called “Minor Currency Pairs” or “Cross Currency Pairs”. It doesn’t consist of UC dollar. Below is the example of some Minor Currency Pairs.
|3||British pound/Japanese Yen||GBP/JPY|
|4||Swiss Franc/Japanese Yen||CHF/JPY|
|5||New Zealand Dollar/Japanese Yen||NZD/JPY|
|6||British Pound/Canadian Dollar||GBP/CAD|
Each pair has two quotation price buy and sell. The price at which you buy the currency pair is called bid price. And the price at which you sell the currency pair is called ask price. So, the difference between the bid price and ask price is called Spread. Spread is the amount that you must pay to the forex broker.
Currencies are traded in a standardized value which is called Lot,
- Standard Lot size is equal to 100,000 units.
- Mini Lot is equal to 10,000 units
- Micro Lot is equal to 000-units