Buying And Selling Currency Pairs

Now you have the idea that Forex trading, or foreign exchange trading, involves buying one currency while simultaneously selling another. But it operates through a “forex broker ‘or a “Contract for Difference (CFD)” provider and involves trading in currency pairs.

Let’s dive into the fascinating world of currency pairs with Assh! 

What is a Currency Pair?

A currency pair represents the relative value of two different currencies in the foreign exchange (FX) market.

For example, in the EUR/USD currency pair. When you  trade currency pairs, you’re basically buying one currency while simultaneously selling another. 

Moreover, Think of trading currency pairs as a “balance scale”, with each currency on opposite sides, constantly shifting up and down as their values change.

An exchange rate is the price of one currency in terms of another. 

These rates fluctuate based on various economic factors and the relative strength of each currency. 

Forex trading capitalizes on these fluctuations to make profits.

Understanding the Currency pairs

Now we are going to discuss what is base currency and a quote currency?

In currency trading, the base currency is the first currency list in a currency pair, while the quote currency is the second currency. The exchange rate shows how much of the quote currency is need to purchase one unit of the base currency.

Imagine you’re at an international fair, and you see a booth selling exotic fruits. The sign reads “1 Dragonfruit = 3 Mangoes.” Here, the dragonfruit is the base currency, and the mangoes are the quote currency. In this example, the base currency (dragonfruit) is value at one unit, and you need three units of the quote currency (mangoes) to buy one Dragonfruit.

According to this, in the currency pair EUR/USD, the euro (EUR) is the base currency, and the US dollar (USD) is the quote currency. If the exchange rate is 1.20, it means that 1 euro = 1.20 US dollars. In other words, you would need 1.20 USD to buy 1 EUR.

Types of Currency Pairs

Now we are going to discuss the main three categories:

1. The Majors 

2. The Crosses 

3. The Exotics

The majors pairs always include the U.S. dollar (USD) and are the most traded pairs in the forex market.

The crosses currency pairs also known as minor currency pairs, these do not include the U.S. dollar but involve other major currencies.

Exotic pairs are make up of one major currency and one currency from an emerging market.

The major Currency pairs

So, let’s explore the world of the major currency pairs used in forex trading with Assh.

In the world of forex trading, the major currency pairs are the most frequently trad and the most liquid pairs. 

These pairs involve the U.S. dollar (USD) on one side, reflecting the prominence of the U.S. economy in global finance.

Interesting fact: The Singapore Dollar, playfully nicknamed the “Sing,” made its debut in 1965, marking a new era of financial independence for the city-state and it had issued by the Monetary Authority of Singapore.

Liquidity refers to the level of activity and ease with which assets can be buy or sell in the financial market.

Why Trade Major Currency Pair?

Do you know why it is important in Forex Trading? 

Major currency pairs are attractive to forex traders for several reasons:

1. High Liquidity: Additionally, these pairs are the most liquid in the forex market, meaning they can be traded with minimal price movement and low transaction costs.

2. Lower Spreads: Due to their high liquidity, these usually have lower spreads, which reduces trading costs.

3. Economic Stability: The countries involved in these pairs typically have stable and robust economies, making the pairs less volatile compared to exotic pairs.

4. Availability of Information: Furthermore, there is a wealth of economic data and news available for the countries involved in this, aiding traders in making informed decisions.