Friday, March 24, 2017

What is Forex: Buying And Selling In Currency Pairs

Forex trading is the simultaneous buying of one currency and selling another. Currencies are traded through a broker or dealer, and are traded in pairs; for example the euro and the U.S. dollar (EUR/USD) or the British pound and the Japanese yen (GBP/JPY).
When you trade in the forex market, you buy or sell in currency pairs.
Imagine each currency pair constantly in a “tug of war” with each currency on its own side of the rope. Exchange rates fluctuate based on which currency is stronger at the moment.
Major Currency Pairs
The currency pairs listed below are considered the “majors”. These pairs all contain the U.S. dollar (USD) on one side and are the most frequently traded. The majors are the most liquid and widely traded currency pairs in the world.
Currency Pair
Countries
FX Geek Speak
EUR/USD
Euro zone / United States
“euro dollar”
USD/JPY
United States / Japan
“dollar yen”
GBP/USD
United Kingdom / United States
“pound dollar”
USD/CHF
United States/ Switzerland
“dollar swissy”
USD/CAD
United States / Canada
“dollar loonie”
AUD/USD
Australia / United States
“aussie dollar”
NZD/USD
New Zealand / United States
“kiwi dollar”
Major Cross-Currency Pairs or Minor Currency Pairs
Currency pairs that don’t contain the U.S. dollar (USD) are known as cross-currency pairs or simply as the “crosses.” Major crosses are also known as “minors.” The most actively traded crosses are derived from the three major non-USD currencies: EUR, JPY, and GBP.
Euro Crosses
Currency Pair
Countries
FX Geek Speak
EUR/CHF
Euro zone / Switzerland
“euro swissy”
EUR/GBP
Euro zone / United Kingdom
“euro pound”
EUR/CAD
Euro zone / Canada
“euro loonie”
EUR/AUD
Euro zone / Australia
“euro aussie”
EUR/NZD
Euro zone / New Zealand
“euro kiwi”
Yen Crosses
Currency Pair
Countries
FX Geek Speak
EUR/JPY
Euro zone / Japan
“euro yen” or “yuppy”
GBP/JPY
United Kingdom / Japan
“pound yen” or “guppy”
CHF/JPY
Switzerland / Japan
“swissy yen”
CAD/JPY
Canada / Japan
“loonie yen”
AUD/JPY
Australia / Japan
“aussie yen”
NZD/JPY
New Zealand / Japan
“kiwi yen”
Pound Crosses
Pair
Countries
FX Geek Speak
GBP/CHF
United Kingdom / Switzerland
“pound swissy”
GBP/AUD
United Kingdom / Australia
“pound aussie”
GBP/CAD
United Kingdom / Canada
“pound loonie”
GBP/NZD
United Kingdom / New Zealand
“pound kiwi”
Other Crosses
Pair
Countries
FX Geek Speak
AUD/CHF
Australia / Switzerland
“aussie swissy”
AUD/CAD
Australia / Canada
“aussie loonie”
AUD/NZD
Australia / New Zealand
“aussie kiwi”
CAD/CHF
Canada / Switzerland
“loonie swissy”
NZD/CHF
New Zealand / Switzerland
“kiwi swissy”
NZD/CAD
New Zealand / Canada
“kiwi loonie”
Exotic Currency Pairs
Exotic Currency Pairs
No, exotic pairs are not exotic belly dancers who happen to be twins. Exotic currency pairs are made up of one major currency paired with the currency of an emerging economy, such as Brazil, Mexico, or Hungary. The chart below contains a few examples of exotic currency pairs. Wanna take a shot at guessing what those other currency symbols stand for?
Depending on your forex broker, you may see the following exotic currency pairs so it’s good to know what they are. Keep in mind that these pairs aren’t as heavily traded as the “majors” or “crosses,” so the transaction costs associated with trading these pairs are usually bigger.
Currency Pair
Countries
FX Geek Speak
USD/HKD
United States / Hong Kong
USD/SGD
United States / Singapore
USD/ZAR
United States / South Africa
“dollar rand”
USD/THB
United States / Thailand
“dollar baht”
USD/MXN
United States / Mexico
“dollar peso”
USD/DKK
United States / Denmark
“dollar krone”
USD/SEK
United States / Sweden
USD/NOK
United States / Norway
It isn’t unusual to see spreads that are two or three times bigger than that of EUR/USD or USD/JPY. So if you want to trade exotics currency pairs, remember to factor this in your decision.


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