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Lincoln Ferguson

How do Forex pairs work?

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Hello, thank you for asking! 

Forex pairs work as currency pairs, where the value of one currency is compared against the value of another currency. The former is called the base currency, while the latter is known as the quote currency.

In these pairs, it is indicated how much of the second, or quote currency, is needed to buy the first one - the base currency. They are identified by their ISO code, which consists of three letters and represents them in the Forex currency trading world. For instance, USD is the code for the U.S. dollar, etc. 

Their trading is conducted in the foreign exchange market, or Forex, which is arguably the largest trading market due to its high liquidity. It allows traders to buy, sell, exchange, and speculate on currencies, and their values. It is open 24 hours a day, 5 days a week.

All Forex trades involve buying or selling of a specific currency, when you buy the currency pair, you buy the base currency and sell the quote one. On another side, when you sell, you sell the base currency and buy the quote currency.

The most popular currency pair is EUR/USD, which sees the highest trading volume in Forex, other notable currency pairs are USD/JPY, GBP/USD, USD/CHF, AUD/USD, NZD/USD, and USD/CAD. 

The last three currency pairs are known as commodity currencies, as both countries (Australia, New Zealand, and Canada) trade a lot in commodities, and are affected by their prices.
 

 

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