Understanding currency pairs. Our first grade in forex literacy is for understanding how to read the price quote. In forex, currencies are always quoted in pairs. In other words, it's only possible to value a currency in terms of another one. If you want to buy Euros, how are you going to pay for it? If you were to pay in euros, you'd not be.

Understanding currency pairs

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Understanding currency pairs. We do not consider that beginners may have difficulties in understanding the currency pairs that is the foundation of currency trading through retail brokers. In the stock market, you trade the shares of the companies. You buy and sell them. You pay money to buy the stocks. But what if you wanted to trade or buy and sell.

Understanding currency pairs


Currency pairs are among the most popular questions I am always asked. But I should not be surprised, because we always focus on the advanced topics like technical analysis, candlesticks, indicators… and we forget about the basics. We do not consider that beginners may have difficulties in understanding the currency pairs that is the foundation of currency trading through retail brokers.

In the stock market, you trade the shares of the companies. You buy and sell them. You pay money to buy the stocks. But what if you wanted to trade or buy and sell currencies? It is the same in any other kinds of trading. You pay money to buy a commodity. In foreign currency exchange, you trade currencies. So again, you have to pay something to buy something else. You pay a currency to buy another currency. You sell a currency against another currency. To be able to do that, they have created currency pairs.

In each currency pair, the first currency is the commodity and the second currency is the money. No matter in what currency your trading account is. This is how it works. Any trade in the market has to be done through USD. US dollar is the main currency and is the axis of all transactions on the currency market. Any currency pair that you buy or sell, has to be done through USD. These processes will be done automatically and you just need to click on the buy or sell buttons.

Let me give you an example. You borrow my car for two weeks. You sell my car. But you have to return my car after two weeks, right? This is what we do when we sell a currency pair before we buy it.

You sell it low and buy it lower. This is how to can make profit by selling a currency pair. They are just terms.

And when you sell, they say you have a short position because it may take a shorter time for the price to go down. Markets are not limited to what the retail traders do. In fact, traders are a very small portion of the markets. Sometimes they do it not because of making profit, they do it because they have to.

Sometimes a country has to sell its own currency against another currency to lower its currency value and control its price. However, it is also so risky specially when it is traded through the shorter time frames. The reason is it is so volatile and strong.

Its trading signals are sharp and strong, and it has a wide movement scale. However, you will not have any liquidity problem in the markets because it is such a huge market. It is not like the stock market that sometimes you can not find a buyer for the shares that you have already bought and you want to sell.

Of course, there are two kinds of brokers. Market maker brokers sometimes pretend that they have liquidity problems. But it is a while that they have changed. In general, GBP cross currency pairs are the strongest. I see some traders fall in love with a special currency pair and try to trade it only.

You limit yourself and ignore the free opportunities that the markets give you. There are several currency pairs in the market that you can trade. Why should you ignore all of them and focus on one? Currency pairs are not like different jobs that you have to focus on one of them to master it. A support line breakout is a sell signal in any currency pair. Find a valid support line on a currency pair price chart and go short after its breakout.

No matter what currency pair it is. Do not believe everything you read and hear. Some people start writing articles and e-books when they give up on becoming a profitable trader. So they try to make money through selling their eBooks and training courses. When you follow the longer time frames like daily, weekly and monthly, you can trade several currency pairs when they form a trade setup on any of these time frames.

Again I have my own answer to this question and my answer can be different from the other answers you may find over the Internet. The best time to trade a currency pair is when it forms a strong and sharp signal.

This question is mainly asked by the day traders who trade using small time frames like 5min or 15min. They want to have a trading session every day and they do not like to have any open position during the night. Whether I agree with this idea or not, I will not focus on it here because this article is about the currency pairs.

London session is from 8am to 4am GMT. Currency market has the highest volatility when both of the London and New York markets are open which is about 8am to 1pm EST. But after a few hours, Japan and then Australia start working and so markets become volatile again. So basically this question is not a correct question. You can trade any currency pair when market is moving and there is a strong trade setup.

They are called exotic because of their pip value. When you trade one of these pairs for the first time, you may not believe your eyes when you calculate your stop loss and take profit. A stop loss that has to be placed above the previous candlestick, has a several hundreds of pips value. Those pips are not like the ones your see in other currency pairs.

I call them mini pips. Exotic currency pairs are not limited to those three. Each broker supports a different number of currency pairs.

However, all of them support the 4 major currency pairs and most of the other popular and known currency pairs: Almost all currency pairs are correlated to each other because they are dependent on USD, directly or indirectly.

US economy and so the USD value impacts the whole world. You will trade the currency pairs only when you trade through the retail brokers platforms. You learn more about trading the currencies through a bank account by following the below articles: Thanks for the insights. I spoke to a friend today and I asked him what he did for a living.

I thought he was a Pro Golfer because he seems to golf in every country he visits. He said that he trades currency! So I became interested and wanted to know more about it. Immediately I am online trying to get the basic understanding and this page has really educated me on the subject matter. I think I want to start trading myself.

So, thank you very much for the insight! I recently become interested in the market myself, and have been studing the subject with much vigor.

I find it very interesting. For those individuals who want to engage in should determine the day trading. In this way, it will be easier for them to know what step is appropriate. Thanks a lot for the information. Thank you so much! It is absolutely free: In registering for a demo account I am being asked of account number, does it mean I should provide my real bank account information? You have chosen to login to a demo account.

That is why it is asking you to enter the account number. We follow more currency pairs now as per LuckScout followers requests: You can download it from here: What are your thoughts on the RMB currency?

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