The first thing you need to understand is that FX Trading means you are actually trading Currency Pairs. You are buying one currency while simultaneously selling another currency. Currencies are traded through a broker or dealer, and are traded in pairs; for example the euro and the U.S. dollar (EUR/USD) or the British pound and the Japanese yen (GBP/JPY).
Major Currency Pairs
Here are some of the most liquid and commonly traded Pairs in the Forex market:
- EUR/USD which stands for Euro / US Dollar
- USD/JPY which stands for US Dollar / Japanese Yen
- GBP/USD which stands for British Pound / US Dollar
- USD/CHF which stands for US Dollar / Swiss Franc
- USD/CAD which stands for US Dollar / Canadian Dollar
- AUD/USD which stands for Australian Dollar/US Dollar
- NZD/USD which stands for New Zealand Dollar / US Dollar
Major Cross-Currency Pairs
Currency pairs that don’t involve USD at all are called Cross Currencies, but the premise is the same. Major crosses are also known as “minors.” The most actively traded crosses are derived from the three major non-USD currencies: EUR, JPY, and GBP.
Euro Crosses:
- EUR/CHF Euro zone / Switzerland
- EUR/GBP Euro zone / United Kingdom
- EUR/CAD Euro zone / Canada
- EUR/AUD Euro zone / Australia
- EUR/NZD Euro zone / New Zealand
Yen Crosses:
- EUR/JPY Euro zone / Japan
- GBP/JPY United Kingdom / Japan
- CHF/JPY Switzerland / Japan
- CAD/JPY Canada / Japan
- AUD/JPY Australia / Japan
- NZD/JPY New Zealand / Japan
Other Crosses:
- AUD/CHF Australia / Switzerland
- AUD/CAD Australia / Canada
- AUD/NZD Australia / New Zealand
- CAD/CHF Canada / Switzerland
- NZD/CHF New Zealand / Switzerland
- NZD/CAD New Zealand / Canada
Exotic pairs of currency are made up of one major currency paired with the currency of an emerging economy, such as Denmark or South Africa. These pairs however, have higher transaction costs because most traders don’t usually trade them. Some examples:
- USD/HKD United States / Hong Kong
- USD/ZAR United States / South Africa
- USD/DKK United States / Denmark
- USD/SEK United States / Sweden
- USD/NOK United States / Norway