Foreign exchange, or forex, deals with currency pairs. There are 18 kinds of currency pairs usually quoted by the forex market.

Some retail dealers trade unaccustomed currencies such as the Thai baht and the Czech koruna, but there are 8 currencies mostly traded in the market.

The 8 currencies are namely:

1.  US Dollar or ‘greenback/buck’ (USD)

2.  Japanese Yen (JPY)

3.  British Pound or ‘cable’ (GBP).

4. Canadian Dollar or ‘loonie, the little dollar’ (CAD

5.  European Euro (EUR)

6.  Swiss Franc or ‘swissie’ (CHF)

7.  Australian Dollar or ‘aussie’ (AUD)

8.  New Zealand Dollar or ‘kiwi’ (NZD)

What Is a Currency Pair?

Forex deals with buying and selling a currency pair. The first currency is referred to as the ‘base currency’, and the second currency is referred to as the ‘quote currency’. The currency pair will describe the amount of the quote currency needed to buy a unit of the base currency.

There are seven most liquid currency pairs traded in the market; it’s composed of the four major pairs and the three commodity pairs.

Four Major Pairs

The major pairs are the currency pairs known to be the most heavily traded currencies. These pairs drive the global forex market, and are also known to be the most liquid currencies.

FYI: PIP or pip stands for Percentage in Point, equal to .0001. Forex currency prices are usually quoted up to the fourth decimal. To further illustrate this, if the EUR/USD moves from 1.2710 to 1.2720, it is said to move by 10 pips.

 1. EUR/USD (Euro/US Dollar)

This is the top commonly traded currency pair. This pair is also a highly liquid pair, and is mostly used by traders who are just beginning to learn the basics of the market. Its average daily range is 100 pips.

 2. GBP/USD (British Pound/US Dollar)

This pair is also a widely traded pair; this pair is also considered as a pair with more volatility. This is not recommended for beginners; experience is highly advised before dealing with this currency pair. Its average daily range is 150 pips.

 3. USD/JPY (US Dollar/Japanese Yen)

This pair is said to have its own personality. This pair can become highly volatile, and sometimes, it trends in the opposite direction of the other currency pairs. Its average daily range is 100 pips.

4. USD/CHF (US Dollar/Swiss Franc)

This is another major pair; this is ideal to use when the USD’s strength is being studied and gauged. Its average daily range is 100 pips.

Three Commodity Pairs

Commodity currencies are those that are from countries that have large amounts of commodities or natural resources.

1. USD/CAD (US Dollar/Canadian Dollar)

2. USD/AUD (US Dollar/Australian Dollar)

3. USD/NZD (US Dollar/New Zealand Dollar)

The Australian, Canadian and New Zealand dollars are currencies that are traded at high volumes; hence very liquid in the forex market.

Currency Pairs: an Essential Part in Forex

 Being familiar with currency pairs is a vital part in understanding how the forex market goes. These pairs account to more than half of the forex market.

The forex market has a greater amount of trading instruments, and so, it’s said to be more concentrated than dealing with stocks. Being familiarized with the currency pairs is a great first step in submerging yourself in the forex market.

Content Source: http://www.admiralmarkets.in/