When first trading the Forex market, lots of people are confused by the fact that currencies are traded in pairs. It is not enough to just trade dollar weakness or dollar strength, for example, you have to also pin it against another currency to truly see its value. That is how the Forex market works, and we will try to explain in the following articles how exactly do currency pairs work and which are the most famous currency pairs at the moment.
Currencies are traded in pairs because this is how their value is calculated. You can express the value of a currency in another currency, in precious metals such as gold or silver, or in other goods. In the case of the Forex market, one currency is expressed using another one. For example, in this moment 1 Euro has the value of 1,06 US dollars.
The most famous currency pairs from the Forex market (also called the majors), are listed below, along with their “trading” name:
EUR/USD (euro/dollar) – “euro”
USD/JPY (U.S. dollar/Japanese yen) – “gopher”
GBP/USD (British pound/dollar) – “cable”
USD/CHF (U.S. dollar/Swiss franc) – “swissie”
The three less popular commodity pairs are:
AUD/USD (Australian dollar/U.S. dollar) – “aussie”
USD/CAD (U.S. dollar/Canadian dollar) – “loonie”
NZD/USD (New Zealand dollar/U.S. dollar) – “kiwi”
Of course, there are a lot more currency pairs out there. Any currency which participates in the free market trade can be traded on the Forex market. Thus, you can trade Czech crowns, Polish Zlots and Romanian Lei, but we do not recommend that you do so.
The main currency pairs listed above amount to as much as 95% of the daily trades being performed in the market. Thus, they have the smallest spreads and commissions and are widely traded by a large number of institutional and retail traders. One can make a very good living trading just one of them. For example, the most famous and most traded currency pair, the EUR/USD, has entire forums dedicated to it. Thousands of traders watch the same graph, but have tens and hundreds of different interpretations of it.
Especially for beginner traders, we strongly recommend picking one or maybe two currency pairs and learning their swings. Each currency pair is unique in volatility, support and resistance areas, when and how it moves. Each one requires a lot of screen time to master, but it is usually very rewarding. Making even one good trade every day is enough for a great trading career. Best of luck in this endeavor!