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
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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