The first thing that you need to understand is what you are looking at when you see a currency pair.
When you look at the currency table or are deciding to trade a pair you will see the symbols of the currencies available to trade.
For example, if you go to trade the Euro vs the US dollar you will see the currency pair symbols EUR/USD.
The first currency mentioned which in this case is the Euro is called the “Base currency” and the second currency which in this case is the US dollar is called the “Counter currency”.
Major Currency Pairs
The most commonly traded pairs are called the Major’s and these include:
You will note that the US dollar is always one of the currencies in a major pair.
The majors make up approximately 85% of the Forex market and as a result have high liquidity, which means they have high trading volumes and volatility which creates multiple trading opportunities.
Cross Currency Pairs
In addition to the majors, you also have the option to trade cross currency pairs.
Crosses do not contain the US dollar as a currency that contain other major currencies and example of this is the EUR/CHF.
Exotic Currency Pairs
Finally, we have the Exotics, these pairs that have one major currency and another that is from an emerging market.
Such as the Singapore dollar or South African Rand.
Nicknames of Currency Pairs
When you start trading, you will start to come to know the pairs by their nicknames.
The “Sterling vs US dollar”(GBP/USD) is commonly referred to as the cable.
The “Aussie dollar vs US dollar” (AUD/USD) is called the Aussie and the “New Zealand dollar vs US dollar” (NZD/USD) is the kiwi.