The main object of trade in the foreign exchange market is foreign currency. The coins are written in Latin symbols (ISO codes), which have become a traditional international practice. These codes have only three characters: the first two characters represent the name of the country, and the last figure represents the name of the currency.
Currency: Prices and Pips
In the Forex market, all currencies are quoted and traded in pairs (such as EUR / USD, GBP / USD) because, in trade, you need to sell one currency to buy another or vice versa. The first currency is known to be the base currency, while the second is the quoted currency. In most Broker, they use a “/” as a sign of separation.
When an operator has bought a currency pair (bought a specific volume of base currency and paid for it with the quoted money), this is called “ opening a PURCHASE position ” When, in the future, an operator will sell the same again currency pair (it will sell the same volume of base currency and get the quoted money for it), this is called “ closing a BUY position ”.
Main, Minor and Commodity Currency Types
The list of Main Currencies includes all those currencies that are traded most actively in the market.
List of major currencies in the Forex market:
- USD American dollar
- EUR International European Currency – Euro
- AUD Australia, Australian Dollar
- CAD Canadian dollar
- GBP British pound sterling
- CHF Swiss franc
- JPY Japanese Yen
All other currencies are considered the second category or minor currencies. And finally, the commodity currencies are from those countries whose internal trade is based on the export of raw materials – oil, gas, metals, etc. There is a wide range of these currencies, but the most important is the Australian dollar, the Canadian dollar, and the New Zealand dollar.
There is also a classification of currency pairs by the presence of the USD in them. The main currency pairs are those in which the US dollar exists (as a base or as a quoted currency).
Currency pairs that have USD neither in the base nor in the quoted currency are called cross pairs. Beginners are advised to operate them with the major currencies, and experienced operators deal with cross pairs, as for the effective trade with them is required to have a good economic knowledge of different countries. Here are some examples of cross pairs: GBP / JPY, EUR / JPY, and GBP / EUR.