Currency Pair
What is a Currency Pair in Trading?
A currency pair in Forex trading shows the price of one currency compared to another. The first is the base currency, and the second is the quote currency. The exchange rate tells you how much of the quote currency is needed for one unit of the base.
Example of a Currency Pair
Take EURUSD as an example.
- EUR is the base currency.
- USD is the quote currency.
- If the price is 1.16260, it means 1 Euro equals 1.16260 US Dollars.
In currency pair trading, when you buy EURUSD, you’re buying Euros and selling Dollars at the same time. If you sell EURUSD, you’re selling Euros and buying Dollars.
Types of Currency Pairs
- Major pairs – Always include the US Dollar and another leading currency, like EURUSD, USDJPY, GBPUSD, AUDUSD, USDCHF, USDCAD, and NZDUSD..
- Minor pairs – Any two global currencies where the US Dollar (USD) is not included, like EURGBP or GBPJPY.
- Exotic pairs – Combine a major currency with one from a smaller or emerging economy, like EURTRY or USDSGD.
Other Glossary Terms
C
- CFD (Contract for Difference)
A CFD is a financial agreement that allows you to speculate on the price movement of assets, such as stocks, currencies, indices, cryptos, or commodities, without owning them.
- Cross-Currency Pair
A cross currency pair is any currency pair that does not include the U.S. Dollar (USD).
- Close Price
Closing price (or close price) is the last price of a CFDs pair when a trading period ends.
- Commission
Commission (or forex commission, forex trading commission) is like a small service charge you pay to the forex broker every time you open or close a trade.
- Contract size
Contract size is the amount of a financial asset you are controlling in one trade. In simple words, it tells you “how big” your trade is.
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