Introduction to Currency Pairs

Forex currency symbols are always three letters, where the first two letters identify the name of the country and the third letter identifies the name of that country’s currency.

Major Currency Pairs with USD ( U.S Dollar )

The “majors” are those currencies that are the major countries that are paired vs. the U.S. dollar (plus their nick names in parenthesis):

The Forex market is unique within the world markets. It’s like a Super, because the market is open 24-hours a day. At any time, somewhere around the world a financial center is open for business, and banks and other institutions exchange currencies every hour of the day and night with generally only minor gaps on the weekend.

The foreign exchange markets follow the sun around the world, so you can trade late at night (if you’re a vampire) or in the morning (if you’re an early bird) Haahahaa. Just a joke in-between, never mind.

The chart below shows global foreign exchange activity. The dollar is the most traded currency, being on one side of 86% of all transactions. The euro’s share is second at 37%, while that of the yen is third at 16.5%.



Source : BIS Triennial Survey 2007

Bank for International Settlements

Every three years, the Bank for International Settlements (BIS) coordinates a global central bank survey designed to yield comprehensive and internationally consistent information on the size and structure of foreign exchange (FX) and over-the-counter (OTC) derivatives markets

The BIS announced today that it will conduct the eighth such triennial survey in April and June 2010. The 54 participating central banks will compile data collected from the reporting financial institutions in their countries for submission to the BIS, which will calculate and publish the global totals. In April 2010, data will be collected on daily turnover in notional amounts of Forex Trading.

What is Base & Quote Currency ?

Base Currency is the first currency quoted in a currency pair on foreign exchange.
E.g. EUR/USD as 1EUR:USD = 1.4200/03
EUR is the base currency.

Quote Currency is the second currency quoted in a currency pair on the foreign exchange.
E.g. USD/JPY
JPY is the quote currency.

Pips : Percentage in Point

• All prices in the Forex market are quoted with 4 decimal point in a quote. Eg.GBP/USD 1.9455
• Only the USD/JPY currency is quoted with a 2 decimal point. Eg USD/JPY 122.33
• Note: When a base currency is stronger, it increases the value of the quoted currency.
• If the quoted currency is lower, it simply means to say that the base currency is weakening.
• For eg If GBP/USD increases from 1.9455 TO 1.9555 that means GBP has gone up by 100 pips AND if it
decreases to 1.9355 it means GBP has gone down by 100 pips ( Note:- You Ignore the Decimal Points)