When first learning about trading currency on the Forex, it’s not unusual for your head to spin. Like learning anything new, there is a period of total confusion followed by a little clarity followed by your first glimmer of all the bits of information beginning to come together.
To assist you in your learning, I’ve compiled a list of the symbols of the most-traded currencies. The symbol is first, followed by the country and lastly the common name and nickname of the particular currency. These countries’ currencies are involved in the highest number of transactions processed on the FX each day:
USD United States Dollar Buck
EUR Euro Euro Fiber
JPY Japan Yen Yen
CHF Switzerland Franc Swissy
CAD Canada Dollar Loonie
AUD Australia Dollar Aussie
GBP Great Britain Pound Cable
NZD New Zealand Dollar Kiwi
Each Forex currency symbol has three letters. The first two describe the country and the third the name of that particular country’s currency.
The base currency is in the first position of a pair. You could also see it called the accounting, domestic or the primary currency. The second in the pair is called the quote or counter currency. The quote currency is the quantity of that currency that is required to purchase a single unit of the base currency.
Together, these 6 major Forex pairs account for 90% of all Forex transactions:
– EUR/USD: Euro and US dollar.
– GBP/USD: British pound and US dollar.
– USD/JPY: US dollar and Japanese yen.
– USD/CHF: US dollar and Swiss franc.
– AUD/USD: Australian dollar and US dollar.
– USD/CAD: US dollar and Canadian dollar.
Because the US dollar is either the base or the counter currency in 85% of Forex trades, which means it is in all of the major pairs. Any pairs without the USD are called ‘cross rates.’ This is how Investopedia explains a cross rate:
“If an exchange rate between the Euro and the Japanese Yen was quoted in an American newspaper, this would be considered a cross rate in this context, because neither the euro or the yen is the standard currency of the U.S. However, if the exchange rate between the euro and the U.S. dollar were quoted in
that same newspaper, it would not be considered a cross rate because the quote involves the U.S. official currency.”
What is the best pair for beginning traders?
The currency pair to begin trading with is EUR/USD, for two reasons:
1. Because EUR/USD is the most commonly traded pair, which means liquidity is high and the spread, which is your cost, is usually low.
2. Because ample data is readily available on both currencies, so it is easy to access financial news and alerts. The second most traded that a beginner might choose to start with is GBP/USD.
Whichever pair you choose, do try to stay with one pair when you’re just getting started. If you try to follow too many pairs to start, it becomes very difficult to stay on top of the new, prices and trends.