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What is forex trading?

What is Forex?

What is Forex?
Forex trading is the simultaneous buying of one currency and selling of another.

What Is Traded In Forex?

Currencies are traded through a “forex broker” or “CFD provider” and are traded in
Buying And Selling Currency
pairs. Currencies are quoted in relation to another currency. Pairs

Forex Market Size And Liquidity

For example, the euro and the U.S. dollar (EUR/USD) or the British pound and the
Japanese yen (GBP/JPY). How To Trade Forex

How Do You Trade Forex?

When you trade in the forex market, you buy or sell in currency pairs.
How to Make Money Trading Forex

Know When to Buy or Sell a

Imagine each currency pair constantly in a “tug of war” with each currency on its own
side of the rope.

An exchange rate is the relative price of two currencies from two different countries.

Exchange rates fluctuate based on which currency is stronger at the moment.

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Your Overall Progress Report

There are three categories of currency pairs:

1. The “majors“

2. The “crosses“
3. The “exotics“
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Lessons Completed
The major currency pairs always include the U.S. dollar.

Cross-currency pairs do NOT include the U.S. dollar. Crosses that involve any of the Unlock Tracking, Sign In
major currencies are also known as ” minors”.

Exotic currency pairs consist of one major currency and one currency from an emerging
market (EM). Partner Center
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Major Currency Pairs

The currency pairs listed below are considered the “majors.”

These pairs all contain the U.S. dollar (USD) on one side and are the most frequently
traded.

While there are EIGHT major currencies, there are only SEVEN major currency pairs.

Compared to the crosses and exotics, the price moves more frequently with the majors,
which provides more trading opportunities.
 CURRENCY PAIR COUNTRIES FX GEEK SPEAK

EUR/USD Eurozone / United States “euro dollar”

USD/JPY United States / Japan “dollar yen”

GBP/USD United Kingdom / United States “pound dollar”

USD/CHF United States/ Switzerland “dollar swissy”

USD/CAD United States / Canada “dollar loonie”

AUD/USD Australia / United States “aussie dollar”

NZD/USD New Zealand / United States “kiwi dollar”

The majors are the most liquid in the world.

Liquidity is used to describe the level of activity in the financial market.

In forex, it’s based on the number of active

traders buying and selling a specific currency
pair and the volume being traded.

The more frequently traded something is the

higher its liquidity.

For example, more people trade the EUR/USD

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currency pair and at higher volumes than the
AUD/USD currency pair.

This means that EUR/USD is more liquid than AUD/USD.

Major Cross-Currency Pairs or Minor Currency

Pairs

Currency pairs that include any two of the major currencies except the U.S. dollar are
known as cross-currency pairs or simply as the “crosses.”

Major crosses are also known as “minors.”

While not as frequently traded as the majors, the crosses are still pretty liquid and still
provide plenty of trading opportunities.

Don’t confuse minor currency pairs with the seven major currency pairs, all of which include
the U. S. dollar against one of the seven other most liquid currencies in the world.

The most actively traded crosses are derived from the three major non-USD currencies:
EUR, JPY, and GBP.

Euro Crosses

CURRENCY PAIR COUNTRIES FX GEEK SPEAK

EUR/CHF Eurozone / Switzerland “euro swissy”

EUR/GBP Eurozone / United Kingdom “euro pound”

EUR/CAD Eurozone / Canada “euro loonie”

EUR/AUD Eurozone / Australia “euro aussie”

EUR/NZD Eurozone / New Zealand “euro kiwi”

EUR/SEK Eurozone / Sweden “euro stockie”

EUR/NOK Eurozone / Norway “euro nockie”

Yen Crosses
 CURRENCY PAIR COUNTRIES FX GEEK SPEAK

EUR/JPY Eurozone / Japan “euro yen” or “yuppy”

GBP/JPY United Kingdom / Japan “pound yen” or “guppy”

CHF/JPY Switzerland / Japan “swissy yen”

CAD/JPY Canada / Japan “loonie yen”

AUD/JPY Australia / Japan “aussie yen”

NZD/JPY New Zealand / Japan “kiwi yen”

Pound Crosses

PAIR COUNTRIES FX GEEK SPEAK

GBP/CHF United Kingdom / Switzerland “pound swissy”

GBP/AUD United Kingdom / Australia “pound aussie”

GBP/CAD United Kingdom / Canada “pound loonie”

GBP/NZD United Kingdom / New Zealand “pound kiwi”

Other Crosses

PAIR COUNTRIES FX GEEK SPEAK

AUD/CHF Australia / Switzerland “aussie swissy”

AUD/CAD Australia / Canada “aussie loonie”

AUD/NZD Australia / New Zealand “aussie kiwi”

CAD/CHF Canada / Switzerland “loonie swissy”

NZD/CHF New Zealand / Switzerland “kiwi swissy”

NZD/CAD New Zealand / Canada “kiwi loonie”

Exotic Currency Pairs

No, exotic pairs are not exotic belly dancers who happen to be twins.

An exotic currency is a currency from countries with developing or emerging markets.

Exotic currency pairs are made up of one major currency paired with the currency of
an emerging economy, such as Brazil, Mexico, Chile, Turkey, or Hungary.

Basically, an exotic currency pair includes one major currency alongside an exotic
currency.

The chart below contains a few examples of

exotic currency pairs.

Wanna take a shot at guessing what those other

currency symbols stand for?

Depending on your forex broker, you may see

the following exotic currency pairs so it’s good to
 Advertisement know what they are.

Keep in mind that these pairs aren’t as heavily traded as the “majors” or “crosses,” so
the transaction costs associated with trading these pairs are usually bigger.

CURRENCY PAIR COUNTRIES FX GEEK SPEAK

USD/BRL United States / Brazil “dollar real”

USD/HKD United States / Hong Kong

USD/SAR United States / Saudi Arabia “dollar riyal”

USD/SGD United States / Singapore “dollar sing”

USD/ZAR United States / South Africa “dollar rand”

USD/THB United States / Thailand “dollar baht”

USD/MXN United States / Mexico “dollar mex”

USD/RUB United States / Russia “dollar ruble” or “Barney”

USD/PLN United States / Poland “dollar zloty”

USD/CLP United States/ Chile

It’s not unusual to see spreads that are two or three times bigger than that of EUR/USD
or USD/JPY.

Due to the overall lower degree of liquidity, exotic currency pairs tend to be far more
sensitive to economic and geopolitical events.

For example, a political scandal or unexpected election results can cause an exotic
pair’s exchange rate to swing violently.

So if you want to trade exotics currency pairs, remember to factor this into your
decision.

For those of y’all who are really mesmerized by exotics, here’s a more comprehensive
list.

CURRENCY CODE COUNTRY CURRENCY CODE COUNTRY

AED UAE Dirham ARS Argentinean Peso

AFN Afghanistan Afghani GEL Georgian Lari

MYR Malaysian Ringgit AMD Armenian Dram

GYD Guyanese Dollar MZN Mozambique new Metical

AWG Aruban Florin IDR Indonesian Rupiah

OMR Omani Rial AZN Azerbaijan New Manat

IQD Iraqi Dinar QAR Qatari Rial

BHD Bahraini Dinar IRR Iranian Rial

SLL Sierra Leone Leone BWP Botswana Pula

JOD Jordanian Dinar TJS Tajikistani Somoni

BYR Belarusian Ruble KGS Kyrgyzstani Som

TMT Turkmenistan new Manat CDF Congolese Franc

LBP Lebanese Pound TZS Tanzanian Schilling

DZD Algerian Dinar LRD Liberian Dollar

UZS Uzbekistan Som EGP Egyptian Pound

MAD Moroccan Dirham WST Samoan Tala

 EEK Estonian Kroon MNT Mongolian Tugrik

MWK Malawi Kwacha ETB Ethiopian Birr

THB Thai Baht TRY New Turkish Lira

ZAR South African Rand ZWD Zimbabwe Dollar

BRL Brazilian Real CLP Chilean Peso

CNY Chinese Yuan Renminbi CZK Czech Koruna

HKD Hong Kong Dollar HUF Hungarian Forint

ILS Israeli Shekel INR Indian Rupee

ISK Icelandic Krona KRW South Korean Won

KWD Kuwaiti Dinar MXN Mexican Peso

PHP Philippine Peso PKR Pakistani Rupee

PLN Polish Zloty RUB Russian Ruble

SAR Saudi Arabian Riyal SGD Singaporean Dollar

TWD Taiwanese Dollar

DID YOU KNOW? There are 180 legal currencies in the world, as recognized by the United
Nations. That’s a lot of potential currency pairs! Unfortunately, not all of them are readable.
Forex brokers tend to offer traders up to 70 currency pairs.

Aside from the three main categories of currency pairs, there are other “groups” of
currencies that are thrown around in the FX world that you should be aware of.

G10 Currencies

The G10 currencies are ten of the most heavily traded currencies in the world, which
are also ten of the world’s most liquid currencies.

Traders regularly buy and sell them in an open market with minimal impact on their own
international exchange rates.

COUNTRY CURRENCY NAME CURRENCY CODE

United States dollar USD

European Union euro EUR

United Kingdom pound GBP

Japan yen JPY

Australia dollar AUD

New Zealand dollar NZD

Canada dollar CAD

Switzerland franc CHF

Norway krone NOK

Sweden krona SEK

Denmark krone DKK

The Scandies

Scandinavia is a subregion in Northern Europe, with strong historical, cultural, and

linguistic ties.

The term “Scandinavia” in local usage covers the three kingdoms of Denmark,
Norway, and Sweden.
 Together, their currencies are known as the
“Scandies“.

Back in the day, Denmark and Sweden

established the Scandinavian Monetary Union to
merge their currencies to a gold standard.
Norway joined later.

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This meant that these countries now had one
currency, with the same monetary value, with
the exception that each of these countries minted its own coins.

But then World War I happened, the gold standard was abandoned and the
Scandinavian Monetary Union disbanded. These countries decided to keep the
currency, even if the values were separate from one another. And this remains the state
of things.

If you notice their currency names, they all look similar. That’s because the word “krone
or krona” literally means “crown”, and the differences in spelling of the name represent
the differences between the North Germanic languages.

Crown currencies. What a cool name huh?

I don’t know about you, but saying “Hook me up with some crowns yo.” sounds way
cooler than “Hook me up with some dollahs yo.”

COUNTRY CURRENCY NAME CURRENCY CODE

Denmark krone DKK

Sweden krona SEK

Norway krone NOK

SEK and NOK also have cool nicknames, “Stockie” and “Nokie“.

So when paired with the U.S. dollar, USD/SEK is read “dollar stockie” and USD/NOK is
read “dollar nockie”.

CEE Currencies

“CEE” stands for Central and Eastern Europe.

Central and Eastern Europe is a term encompassing the countries in Central

Europe, the Baltics, Eastern Europe, and Southeast Europe (the Balkans), usually
meaning former communist states from the Eastern Bloc (Warsaw Pact) in Europe.

Central and Eastern European Countries (CEECs) is an OECD term for the group of
countries comprising Albania, Bulgaria, Croatia, the Czech Republic, Hungary, Poland,
Romania, the Slovak Republic, Slovenia, and the three Baltic States: Estonia, Latvia,
and Lithuania.

Regarding the FX market, there are four main CEE currencies to be aware of.

COUNTRY CURRENCY NAME CURRENCY CODE

Hungary forint HUF

Czech Republic koruna CZK

Poland zloty PLN

Romania leu RON

BRIICS

BRIICS is the acronym coined for the association of six major emerging national
economies: Brazil, Russia, India, Indonesia, China, and South Africa.

Originally the first four were grouped as “BRIC” (or “the BRICs”). BRICs was a term
created by Goldman Sachs to name today’s new high-growth emerging economies.
BRIICS is the term created by the OECD, when it added Indonesia and South Africa.

COUNTRY CURRENCY NAME CURRENCY CODE

Brazil real BRL

Russia ruble RUB

India rupee INR

Indonesia rupiah IDR

China yuan CNY

South Africa rand ZAR

BRICS+

At the BRICS Summit held in September, 2023, the BRICS+ countries announced plans
to expand the grouping to include new members!

Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates have
been invited to join as full members from January 2024.

The new BRICS+ will represent 46 percent of the world population and account for
roughly 37 percent of global GDP.

Summary

Whew! That was a lot of information on currencies but you just raised your FX IQ
points! ฀

Let’s summarize what you’ve learned in a series of questions:

What is a currency pair in forex?

A currency pair is a pairing of currencies where the value of one is relative to the other.
For example, GBP/USD is the value of the British pound relative to the U.S. dollar.

What are the major currency pairs?

Major currency pairs (“majors”) are those that include the U.S. dollar and are the most
frequently traded. There are seven of them: EUR/USD, USD/JPY, GBP/USD,
USD/CAD, USD/CHF, AUD/USD, and NZD/USD.

What are the currency crosses?

Currency crosses (“crosses”) are the more frequently traded currencies that do NOT
include the U.S. dollar in their pairing. Crosses include EUR/GBP, EUR/CAD, GBP/JPY,
EUR/CHF, EUR/JPY, etc.

How many currency pairs exist?

There are HUNDREDS of currency pairs in existence but not all can be traded in the FX
market. The United Nations currently recognizes 180 currencies. If you were to pair
each currency up with another, it’s a lot.

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