Currency pairs are the quotation of two different currencies traded against each other in the foreign exchange (forex) market. Each pair consists of a base currency (the first currency in the pair) and a quote currency (the second currency in the pair). The price of the pair represents how much of the quote currency is needed to purchase one unit of the base currency, on other words the Exchange Rate.
When buying a currency pair, it is expected that the base currency will appreciate relative to the quote currency. On the other hand, when selling a currency pair, it is expected that the base currency will depreciate relative to the quote currency.
For example, in the EUR/USD pair, where the Euro is the base and the US Dollar is the quote:
Buy: Expected appreciation of the Euro relative to the US Dollar.
Sell: Expected depreciation of the Euro relative to the US Dollar.
In the Forex market, currency pairs are generally classified into three categories: Majors, Minors, and Exotics. These categories are primarily based on the liquidity and economic relevance of the currencies involved.
Major Pairs: Major pairs are the most liquid and widely traded. They involve the most important currencies in terms of global economy. Major pairs typically include the US Dollar (USD) as the base currency. They are considered the most stable and have relatively low spreads.
Example: EUR/USD, GBP/USD, and USD/JPY.
Minor Pairs: Minor pairs consist of major currencies but do not include the US Dollar as the base currency. They generally have lower liquidity and trading volume compared to major pairs but are still considered important.
Example: EUR/GBP, GBP/JPY, and AUD/NZD.
Exotic Pairs: Exotic pairs involve a major currency combined with the currency of an emerging or less commonly traded economy. These pairs are considered riskier due to lower liquidity and higher volatility. They may have wider spreads and lower trading availability compared to major and minor pairs.
They are sometimes more attractive to traders with a higher risk tolerance seeking profit opportunities in less traditional markets.
Example: USD/ZAR, EUR/TRY, and USD/THB.
The classification of currency pairs can vary between different brokers. Additionally, the liquidity and spreads of the pairs can be influenced by factors such as trading sessions and market conditions.
Therefore, it is essential to conduct careful analysis before trading any currency pair.
In order to access currency pairs on BlackArrow select the Forex tab in Search Assets.
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