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What is a Forex Pair?

What is a forex pair?

Currency Pair in Forex – Meaning and Explained

The foreign exchange market is huge. Around 170 currencies are in use across the globe. A currency pair is also known as a forex pair. It is essentially used to express the value of one currency against another. There can be over 28,000 potential pairings, of which only a few can account for the maximum trades that are carried out.

When it comes to a forex pair, it contains two parts, a base currency and a quote currency. A trader usually buys the base currency using the quote currency. In terms of representation, the base currency is placed on the left of the pair and is always one unit; the quote currency, on the other hand, is written on the right side. It is followed by the price quote. This expresses the amount of quoted currency that it would require a trader to buy the base currency.

Numerous factors impact the value of one currency against another. Some of them include trading volume, the interest of central banks, and economic performance.

Currency pairs can be of three different types, namely major, minor, and exotic currency pairs.

  • Major pairs exchange US dollars with that of other currencies that are highly traded. These pairs happen to be less volatile when compared to minor and exotic pairs.
  • The minor pairs exchange British pounds, euros, or Japanese yen against smaller currencies or each other. Compared to the major pairs, these have a lower trading volume, but they are also quite well known.
  • Exotic pairs are those in which an emerging currency is traded with a widely used currency. Exotic currency pairs come with a wide bid-ask spread. The prices of these pairs tend to be volatile.

For individuals willing to invest in currency pairs, different online websites and applications can prove to be quite helpful. It must be understood that, since forex trading experiences a high trading volume and market activity, any associated fees for the same are typically very low. One must explore the forex trading market before investing in it. You can make informed decisions by going through best sources for information about trading.

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