The Ultimate Guide to Currency Pairs in Forex Trading

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The Ultimate Guide to Currency Pairs in Forex
Trading
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Introduction

• Forex Trading is currency trading, where buying,
  selling, and exchange of currency pairs take
  place to make profitable returns.
• Therefore, currency pairs are crucial to forex
  trading and every forex trader should be familiar
  with currency pairs, their types, working, and
  how they are traded in the forex market for
  earning profits. 

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What are currency pairs and how do they work? 

• A currency pair is a combination of two foreign
  currencies. Example US dollar and UKs Euro
  (USD/EUR). So, heres how a currency pair works
  in forex trade. A currency pair consists of two
  currencies and their quotations.
• Among the two currencies, the value of one
  currency is quoted against the other currency.
  The first currency that is listed is called the
  base currency and the second currency is known as
  the quote currency.

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• The values of both these currencies (base
  currency and quote currency) are compared to find
  out the amount of quote currency needed to buy a
  unit of base currency.
• Learn forex trading from a reputed and
  experienced institute to get detailed insights on
  currency pairs and other important forex
  concepts. 

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• Every currency comes with a code called an ISO
  currency code. The ISO currency code of the US
  dollar is USD. Similarly, every currency has its
  own code. When a currency pair is traded, it will
  appear in this format - USD/EUR.
• There are different types of currency pairs. Some
  are popular, widely traded and come with high
  liquidity, while some currency pairs are least
  traded and come with low liquidity. 

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Types of Currency Pairs

• There are 3 prominent types of currency pairs. 
• Major currency pairs 
• Minor currency pairs
• Exotic currency pairs 

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• Major currency pairs are currency pairs that are
  traded against the US dollar and are traded in
  high volumes in forex trading. When currency
  pairs are traded in high volumes, they have small
  spreads and high liquidity, which are
  advantageous for the traders.
• This is why most beginner traders and even
  advanced traders prefer to trade major currency
  pairs. Example for major currency pairs EUR/USD,
  USD/CHF, USD/CAD, GBP/USD, USD/JPY, etc. 

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• Minor currency pairs are currency pairs that do
  not include the US dollar. These are also called
  the crosses. These are traded in lesser volume
  compared to the major currency pairs. They also
  have wider spreads and quite low liquidity.
• Exotic currency pairs are rare currency pairs
  that are not popularly traded in the forex
  market. These currency pairs are slowly emerging
  in the market and come with wider spreads. The
  price movements of exotic currency pairs are
  difficult to predict.  

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• Traders rarely choose exotic pairs to trade as
  they come with poor liquidity and high risk
  factors. To learn about currency pairs in a much
  more detailed manner, students or traders can opt
  for a forex trading course.
• In forex trading, currency pairs are continuously
  bought, sold, exchanged and speculated in order
  to execute trades and make profits. While
  purchasing a currency pair, a trader will buy the
  base currency and sell the quote currency.

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• Similarly, when a trader sells a currency pair,
  the base currency will be sold and quote currency
  will be bought. In short, one currency is always
  sold to purchase another currency in forex
  trading. 
• Factors such as the GDP, economic scenarios in a
  country, interest rates, and federal reserve
  actions may influence currency pairs. Join the
  best forex trading class now to learn more about
  every aspect of trading in detail. Investment in
  a course comes with lifelong benefits, as the
  trader will get a strong idea about all the forex
  concepts in a clear manner to engage in
  trading.  

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