What Is a Currency Pair?
A currency pair is the quotation of two different currencies, with the value of one currency being quoted against the other. It is the amount that you pay in one currency for another currency. When a currency’s value changes, it changes relative to another currency. The first listed currency of a currency pair is called the base currency, and the second currency is called the quote currency. When an order is placed for a currency pair, the first listed currency or base currency is bought, while the second listed currency in a currency pair or quote currency is sold.
Understanding Currency Pairs
Trading currency pairs is conducted in the foreign exchange market, also known as the forex market which is the largest and most liquid market in the financial world. This market allows the buying, selling, exchanging, and speculation of currencies. It also allows the conversion of currencies for international trade and investment. The forex market is open 24 hours – five days a week and sees a huge amount of trading volume.
All forex trades involve the purchase of one currency and sale of another. When you buy a currency pair from a forex broker, you buy the base currency and sell the quote currency. Same way, when you sell the currency pair, you sell the base currency and receive the quote currency.
Currency pairs are quoted based on their bid (buy) and ask prices (sell). The bid price is the price that the forex broker will buy the base currency from you in exchange for the quote or counter currency. The ask—also called the offer—is the price that the broker will sell you the base currency in exchange for the quote or counter currency.
Major Currency Pairs
Major currency pairs are classified as major because they are the most popularly traded on a daily basis. All major pairs include the US Dollar as it is the world’s leading and most traded currency of all. It is the most frequently traded pair in the FOREX market.
What Pairs are best to trade?
It depends on your trading style, risk and experience while trading. There is no best pair, but if you are a newcomer to forex trading, our advice is to stick to the major pairs until you become comfortable enough to trade with other pairs. PipsForex offers Direct Market Access to more then 70+ Currency pairs at Live-market prices and with super-tight spreads. Open a Live-Account to trade currency pairs online. You can practice trading any currency pair with our free demo account.