Types of Forex Pairs

Raycho Angelov | 14.06.23 | 5 минути за прочитане

In this article, you will learn what currency pairs are and which are the most traded.

Let's get started.

Introduction

Major Forex pairs

Cross currency pairs

Cross pairs with EUR

Cross pairs with GBP

Cross pairs with JPY

Other Cross currency pairs

Exotic currency pairs

Summary

Introduction

Forex trading involves the concurrent purchase of one currency and the sale of another.

Currencies are traded in pairs through an investment intermediary to access the global financial market.

A currency pair represents the value ratio between two currencies.

The first currency in the pair is the base currency, and the second is the quote currency.

The ratio of the base currency to the quote currency is referred to as the quote.

The quote shows how much of the quote currency is needed to buy the base currency.

For example, in the GBP/USD currency pair, GBP is the base currency and USD is the quote currency.

If the GBP/USD rate is 1.3814, it means that one pound (GBP) is worth 1.3814 US dollars (USD).

If the GBP/USD rate decreases, from 1.3814 to 1.2814 for example, it means that the value of the GBP has decreased relative to the value of the US dollar. At this point, 1 GBP will now be worth 1.2814 USD.

When trading currency pairs, you will always encounter two prices. The price at which you can buy the currency pair is known as the ASK, while the price at which you can sell it is called the BID. The ASK price is always higher than the BID price.

The difference between BID and ASK is called ‘spread’. You will learn more about the spread from the following article:

>> What is ‘spread’ in the financial markets 

Currency pairs compare the currencies of two countries or economic zones, as is the case with the Euro (EUR).

Example:

  • US dollar and Japanese Yen - USD/JPY;
  • Eurozone and US dollar - EUR/USD;
  • Australian dollar and US dollar - AUD/USD etc.

There are several different types of currency pairs:

  • Major currency pairs;
  • Cross currency pairs;
  • Exotic currency pairs. 

Major currency pairs

These currency pairs contain the US Dollar (USD) and are the most frequently traded in the world, usually characterized by higher liquidity and hence lower spreads.

Due to these features, they are a preferred traded instrument, especially by novice traders.

Currency pair

Countries

EUR / USD

Eurozone/USA

GBP / USD

Great Britain/USA

USD / JPY

USA/Japan

USD / CHF

USA/Switzerland

USD / CAD

USA/Canada

AUD / USD

Australia/USA

NZD / USD

New Zealand/USA

Cross currency pairs

Currency pairs that do not contain the USD are called crosses.

The most traded crosses involve EUR, GBP, and JPY.

Crosses with EUR

Currency pair

Countries

EUR/GBP

Eurozone/Great Britain

EUR/AUD

Eurozone/Australia

EUR/NZD

Eurozone/New Zealand

EUR/CAD

Eurozone/Canada

EUR/CHF

Eurozone/Switzerland

Crosses with GBP

Currency pair

Countries

GBP/AUD

Great Britain/Australia

GBP/CAD

Great Britain/Canada

GBP/NZD

Great Britain/New Zealand

GBP/CHF

Great Britain/Switzerland

Crosses with JPY

Currency pair

Countries

GBP/JPY

Great Britain/Japan

EUR/JPY

Eurozone/Japan

AUD/JPY

Australia/Japan

NZD/JPY

New Zealand/Japan

CHF/JPY

Switzerland/Japan

CAD/JPY

Canada/Japan

Other cross pairs

Currency pair

Countries

NZD/CAD

New Zealand/Canada

AUD/NZD

Australia/New Zealand

CAD/CHF

Canada/Switzerland

AUD/CAD

Australia/Canada

NZD/CHF

New Zealand/Switzerland

AUD/CHF

Australia/Switzerland

Exotic currency pairs

Exotic currency pairs contain one major currency and one currency of so-called emerging economies.

The table below describes some of the most popular and traded exotic currency pairs.

Keep in mind that these currency pairs are traded less frequently than the cross pairs and major currency pairs.

As a result, the trading costs, including spread, swap, and commission, are significantly higher.

Open an account and trade with some of the lowest spreads on the market:

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Currency pair

Countries

USD/SAR

USA/Saudi Arabia

USD/BRL

USA/Brasil

USD/ZAR

USA/South Africa

USD/MXN

USA/Mexico

USD/RUB

USA/Russia

USD/SEK

USA/Sweden

USD/NOK

USA/Norway

USD/PLN

USA/Poland

USD/DKK

USA/Denmark

Summary

All currency pair trades involve the simultaneous buying of one currency and selling of another.

A currency pair functions as a tradable instrument, which can be bought and sold.

To learn how to start Forex trading, read this article:

>> Forex Trading: A Complete Beginner's Guide

When you buy a currency pair, you are purchasing the base currency while simultaneously selling the quote currency.

Conversely, when you sell a currency pair, you are selling the base currency and simultaneously buying the quote currency.

The most traded currency pair is the euro against the US dollar (EUR/USD).

For this reason, it is the most liquid currency pair in the world.

In addition, it is also the most suitable for beginner traders, precisely because of the high liquidity and low costs of the positions.

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