Currency trading for dummies, A currency pair is the phrase of two different currencies when one currency is quoted against the other currency the first currency in a currency pair is called the base currency and the second currency in a currency pair is called the quote currency to suppose a pair AUD/USD here Australian dollar is the base currency and U.S dollar is the quote currency .
Currency Trading for Dummies
In currency pairs, we compare the value of one currency to another currency in forex. The base currency (the first currency in a pair) against the second, or the quote currency. It means how much of the second currency is needed to buy one unit of the first currency. Currencies are identified by an ISO code with three letters of their alphabetic code. The ISO code for the Australian dollar is AUD, U.S dollar would be USD, Great British Pound would be GBP.
All the Forex traders buy and sell one currency for another currency. If you buy a currency pair you will buy the base currency and if you sell the currency pair actually you are selling the quote currency. The bid or buy price shows how much of the quote currency you need to get one unit of the base currency. And when you sell a currency pair actually you sell the base currency and you receive the quote currency.
The ask or sale price for the currency pair shows how much you will get the quote currency for selling one unit of the base currency like suppose you a pair AUDUSD represent Australian dollar against US dollar, The value of Australian dollar is always one. If AUDUSD is 0.7220 that shows that one Australian dollar is equalled to 0.7220 US dollar and if you give 0.7220 US dollar you will get one Australian dollar.
Major currency pairs
Thus the most traded currency pair in forex is euro against U.S dollar. And in forex, it is shown as EUR/USD. This pair is the most traded currency in the world and in this quotation EUR/USD = 1.1900 means that one euro is exchanged for 1.1900 U.S dollars.
In this case euro (EUR) is the base currency and U.S dollar (USD) is the quote currency or counter currency and it means that 1 euro is exchanged for 1.19 U.S dollars.
Because there are as many currency pairs in the forex market as the number of currencies in the world. The currencies are traded on daily bases in the market, and the currencies. Which are traded the most in volume against U.S dollar are named as the major currencies. The major currency pairs are EUR.USD, GBP/USD, AUD/USD, USD/CHF, USD/JPY, NZD/USD and USD/CAD. And these pairs are traded 24 hours a day.
Minor currency pairs
So these are the pairs which are not related to U.S dollar are mentioned as the minor currencies. These pairs are not traded as the major currency pairs in the market. Some of the minor currency pairs are EUR/AUD, AUD/JPY, AUD/GBP, AUD/CHF, AUD/CAD, GBP/CAD, GBP/CHF, EUR/JPY/ EUR/CAD and CHF/JPY.
But there are currency pairs which are also major some examples are, EUR/CHF, EUR/GBP, GBP/JPY.
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