A Forex currency pair in Forex Market is the selection of the relative value of a particular currency unit against another currency unit. In other words, the value of a currency is determined by comparing its value to another currency. The first part of a currency pair is termed as “base currency” and the second pair is called “quote currency”. The Forex Currency Pairs determines the amount of money required to purchase one unit of the base currency. This is the reason why best broker for Forex trading considers Forex pair as the main aspect of their career.
Currency pairs in terms of trading
All Forex trades include the simultaneous buying of one currency and selling of another, but the currency pair itself can be considered as a single unit or an instrument that is bought or sold. If a trader buys a currency pair, he’s buying the base currency and is eligible to sell the quote currency. The bid prices determine how much of the quote currency is needed for you to get one unit of base currency. On the other hand, when you sell the currency pair, you sell the base pair and receive quote currency. The selling price for the currency determines how much you will get in the quote currency for selling one unit of base currency.
For instance, if the USD/EUR currency pair is quoted as being USD/EUR=1.5 and you purchase this pair, it means that for every 1.5 Euros that you sell, you are receiving US$1. If you sold the currency pair, you are going to receive 1.5 Euros for every US$1 you sell. The converse of the currency quote is EUR/USD, and the equivalent price would be EUR/USD =0.667, which means that US$0.667 would buy 1 Euro.
Most common currency pairs
There are only a handful of Forex Currency Pairs used in today’s trading market. These are ones most talked about in various Forex trading training courses for beginners.
In the Forex world, only the most economically stable and liquid currencies are demanded in sufficient quantities. For example, due to the size of the potency of the United States Economy, the American currency i.e. dollar is the world’s most actively traded company.
In general trading market, there are 8 main currency pairs that are popularly used. These are:-
- S. Dollar (USD)
- Canadian Dollar (CAD)
- Euro (EUR)
- British Pound (GBP)
- Swiss franc (CHF)
- New Zealand Dollar (NZD)
- Australian Dollar (AUD)
- Japanese yen (JPY)
Following a successful trading strategy, currencies must always be traded in pairs. There are 27 different currency pairs that can be derived from these 8 currencies alone. However, there are about 18 popular currency pairs that are conventionally quoted by Forex market makers or brokers as the result of their overall liquidity. The total amount of currency trading that involves these 18 pairs represents the majority of the trading volume in the Forex market. Such a manageable number of choices make trading, a lot less complicated compared to dealing with equities that have thousands of possibilities to choose from.
When to trade currency pairs
Generally speaking, the best time to trade a currency pair is when it forms a strong and sharp signal in the trading market. There are basically three sessions in the Forex market:-
London session- 8am to 4am GMT
New York session-8am to 4pm EST
Asian session-7pm to 3am EST
The Forex market has the maximum vitality during both London and New York session that is the time between 8am to 1pm EST. After 4 pm the Forex market slows down, but soon after a few hours, Australia and Japan come into the game and Forex market becomes volatile again. Summing up with the perfect time for trading currency pair question, the only answer lies in the fact that when the Forex market is active and volatile, all currency pairs are on the move no matter what session is going on. One can easily trade a currency pair when the market is moving and there is a Forex signal.
One can easily enroll for Forex scalping course or take help of trading courses for beginners to learn more about pairs.