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.

Buying and Selling 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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  1. What Is Forex?
  2. What is Forex: What Is Traded In Forex?
  3. What is Forex: Buying And Selling In Currency Pairs
  4. What is Forex: Market Size And Liquidity
  5. What is Forex: Different Ways To Trade Forex