forex trading

A wide spread between currencies indicates volatility, whereas a narrow spread means that there is a smaller difference between the bid and ask price. Most traders prefer a tighter or narrower spread, as it indicates lower volatility but high liquidity. Our forex trading page has a breakdown of all spreads and margins that we offer on our currency pairs. These are the least traded in the forex market, and are less liquid than the cross pairs. Prices can fluctuate greatly, and due to the lower volume of trades, spreads can be wide.

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Volatility in GBP/USD has been higher in recent times due to the effects of “Brexit” (Britain’s exit from the EU) and the economic uncertainty this has created. To learn more about the GBP/USD currency pair, click here. Minors – Minors are currency pairs that exclude the USD and usually have lower liquidity than the Majors. Now, if you go back to the first paragraph of this article and compare these thoughts, it doesn’t make sense. Unless you’re the broker who is bidding for the item and intends for the trader to sell it to them, and you intend to get the trader to buy after you ask about a currency pair. Currency pairs are the most important elements of Forex trading because they are used as assets for the actual trading process.

When to buy and sell forex

We’re one of the few UK providers to offer weekend trading on certain forex pairs. These include Weekend GBP/USD, Weekend EUR/USD and Weekend JPY/USD – meaning you don’t need to wait for the weekday markets to open to trade. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money. Liquidity shows how interested other traders are in this particular pair. Basically, more popular pairs (e.g., major pairs) have higher liquidity.

For instance, currency pairs such as EUR/USD, GBP/USD and USD/JPY are generally considered to be some of the least volatile pairs since they trade with large amounts of liquidity. The US dollar and Swiss Franc currency pair, also known as trading the “Swissie”, may initially sound a surprise inclusion as Switzerland isn’t a major global economy. However, this currency pair is popular due to the strong reputation Switzerland holds as a safe haven. With a stable financial system and government, traders turn to the franc in times of economic uncertainty. Although it is less liquid than the other major pairs listed, it’s still a popular choice among traders. Known as “The Gopher”, this currency pair is one of the most popular pairs amongst traders.

  • Among the most actively traded and therefore liquid currencies are the NZD, the AUD and the CAD.
  • Trade on our 12 baskets of FX pairs, including the CMC USD Index and CMC GBP Index.
  • If you hear another trader saying “I’m buying the Euro”, he/she is expecting that the value of the Euro will rise against the US Dollar and speculates by buying the EUR/USD exchange rate.
  • If you haven’t yet, opening one takes seconds and costs nothing.Open your forex demo account.
  • Forex quotes tell you how much the prices to buy and sell a given currency, which means they tell you if you can make money from a trade, and how much.

They are famous for allowing transparent and secured digital payments. Although their popularity is constantly growing, their adoption as a reliable alternative to physical money is nowhere close. Some of the popular digital currencies are Ethereum, Bitcoin, and Litecoin. The U.S. Dollar is by far the most heavily traded currency being on 88 percent of all trades in 2019. Dollar by being on 32 percent of transactions, and the Japanese Yen is on 17 percent. A currency pair is a combination of two currencies their values compared against each other.

The forex market enables buying and selling, and conversion of currencies for international trade and investing. Generally speaking, the forex market is open 5 days per week, 24 hours a day. The most popular currency pairs on the market are the major currency pairs. They are known for their high liquidity and narrow spreads, which makes them a good option for every trader. Major currency pairs are those that are made up of USD and another major currency on the market. pairs are comparing the value of a certain currency to another. EUR/USD is the most popular Forex pair as it includes the currencies of the two largest economies in the world. It is highly volatile , making it an excellent choice for intraday trading. It accounts for almost 2% of the total trading turnover. The best time to trade the American dollar for the Japanese yen is from 12 pm to 8 pm GMT and from 11 pm to 8 am . This pair, just like many other ones, is strongly affected by GDP growth or fall, inflation, interest rates, and unemployment data.

Example of a Major Pair Price Quote and Fluctuation

But before you start to interpret, there is a lot of information about price action that you can obtain simply through observation. The first member of every pair is known as the “base” currency, and the second member is called the “quote” or “counter” currency. The International Organization for Standardization decides which currency is the base and which one is the quote within each pair. Keep a close eye on the market trends so that you are able to enter or exit a forex position at the right time. Get tight spreads, no hidden fees, access to 12,000 instruments and more.

Exotic currency pairs definition is pretty straightforward, you just need to take one major and one developing region’s currency, and there you have an exotic currency pair. The most traded Majors include the EUR/USD, AUD/USD, and USD/CAD. And this is everything you need to know about how to read Forex currency pairs. There are other important things you need to learn before you start trading Forex, though. Majors – these are the most popular and most traded currencies.

Major pairs are popular among beginner and expert traders due to the high liquidity and low spreads. A forex pair quotes the price of one currency against another. Within a pair, there are two parts – the base currency and the quote currency.

But all the pairs containing JPY, for instance, have two or three decimal places, depending on the broker. One of the main characteristics of Forex is high liquidity. Liquidity is the ability to sell and buy something as quickly as possible. Some things are more liquid – can be easily bought or sold, while others are less liquid – it’s more difficult to sell/buy them. The US Dollar Index is a futures contract offered by the New York Board of Trade.

Knowing how to read them is perhaps first skill you must have, before entering the market. For example, for the currency “EUR/USD”, EUR is the base currency and USD is thequote currency. Virtual CurrencyVirtual currency is a type of digital currency representing the value in a digital format, and it is active in the virtual community. In most countries, people can use VC as a medium of exchange, but it does not enjoy a legal tender status. Economic GrowthEconomic growth refers to an increase in the aggregated production and market value of economic commodities and services in an economy over a specific period. Fundamental analysis involves analyzing a country’s economic data and upcoming catalysts that could change lead to price changes.

CHF/JPY: Swiss franc/Japanese yen

It is the that a broker earns for processing the trade. Generally, the spread is less for popular currency pairs, such as EUR/USD. This is because such pairs have a very high trading volume. The movement in major forex pairs is often more predictable within the FX market, due to the vast amount of knowledge and research that traders have collected over the years. In summary, major forex pairs are the most frequently traded currency pairs within the forex market. Trading currency pairs are often conducted in the foreign exchange market. – Exotics are usually considered the least traded as they are comprised of currencies that are harder to trade. Swap Forex Market – It is essentially a transaction of Forex pairs in which the parties grant one another an equivalent amount of money using different currencies. The quote is in five decimal places here, but some brokers use four decimal places.

Many retail trading firms also offer 10,000-unit trading accounts and a few even 1,000-unit . Various factors can impact the price movements of forex pairs, including the strength of a country’s economy, geopolitical events, and monetary policy. USDJPY. USDJPY is the second most traded Forex pair worldwide, accounting for 21.8% of the Foreign Exchange market volume . USDJPY is a very dynamic pair offering rich volatility and smooth trends. Historically, USDJPY trades in the same direction with the American markets (S&P 500, DJIA, NASDAQ). The world of Forex comes with a myriad of Forex pairs to trade.


We’ll cover leverage and risk in more detail in the How to trade course. Thank you for choosing to open a Valutrades UK and/or Valutrades Seychelles account. This pair indicates the value of the U.S. dollar against the South African rand. The U.S. dollar represents one of the strongest economies in the world, and the rand is the official currency of South Africa, Namibia, Lesotho, and Eswatini. Pairs can only be purchased (going “long”) or sold (going “short”) as a single unit. The action taken is directly applied to the base currency, while the opposite action is applied to the Countercurrency.

Note that we actually have two currency pairs involved in this calculation—EUR/USD and USD/CAD. In the first pair, USD is the quote currency; it’s the base currency in the second pair. This is often favored among traders, and that’s actually true. The amount of liquidity in euro/dollar is much, much higher than everything else.

It also runs continuously for 24 hours a day, five days a week. The forex market is the most popular financial market, traded by individual retail traders, banks and businesses alike. Learn more about how you can take advantage offorex trading hours. They are known to be the strongest currency pairs globally, and the dominant Forex trading market. One of the biggest reasons why major currency pairs are so popular is their liquidity. Because of high liquidity, major currency pairs can be traded in larger volumes.

forex currency pairs

In most cases, they are not as liquid as the major currency pairs, but the liquidity of minor pairs is still sufficient for most traders. As for spreads, they are wider for minors currency pairs. Some of the most popular minor currency pairs include EUR/GBP, EUR/CHF, and others. Major Currency pairs are the ones that are made up of USD + one of the major currencies in the market.

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86% of retail investor accounts lose money when trading CFDs with this provider. For example, in the EUR/USD currency pair, the US dollar is the quote currency which shows how much US dollars is necessary to buy one euro. When traders say they want to buy a EUR/USD currency pair , they actually want to sell their dollars and buy euros with that. A spread is a cost built into the buying and the selling price of all the currency pairs. In most cases, Forex spreads depend on your Forex broker.