An Introduction to Currency Pairs


Forex trading can prove to be confusing for some traders, not just because of the process per se but also because of its other components, one of which are the currency pairs.

There are numerous currency pairs being offered in the forex market. You only have to choose which one you would like to trade and you can begin. You’ll just have to initially determine how much of the base currency you would actually want to buy and how much quote currency you would need to obtain the amount desired.

snippets of International currencies next to each other

Without further ado, let’s now discuss what exactly a currency pair is.

What is a Currency Pair

Currency pairs are the quotation and pricing structures of the currencies that you get to trade in the forex market. Currencies undergo a process that will help determine their value in comparison to that of another currency. The values of the currencies are shown as rates.

As for the structure of a currency pair, the first listed currency pair is known as the base currency while the second currency is called the quote currency. The currency pair will tell you how much quote currency you’ll need in order to purchase one unit of the base currency.

All forex trades involve the buying and selling of both currencies in a pair at the same time. Note that there are as many currency pairs as there are currencies in the world.

Types of Currency Pairs

There are 3 types of currency pairs found in the forex market. These are the major currency pairs, minor currency pairs, and the exotic currency pairs.

Major Currency Pairs

These pairs all have the U.S. dollar (USD) on one side and are the most frequently traded. All of the major currency pairs have extremely liquid markets and trades 24 hours a day every business day. They also have narrow spreads.

Major currency pairs are basically treated in the forex market the way Apple and Amazon are treated in the stock market. They are by far the most popular, hence the liquidity.

These pairs include:

Minor Currency Pairs

These are currency pairs that do not include the U.S. dollar in any way. Minor currency pairs are also referred to as cross-currency pairs.

These pairs include:

Exotic Currency Pairs

An exotic currency pair is a combination of a major currency and the currency of a developing economy like Brazil or South Africa. They are not as often found in the market as major and minor currency pairs which mean that the spreads tend to be higher when trading them.

These currency pairs include:


Remember than when buying a currency pairs, you’re actually buying the base currency while simultaneously selling the quote currency. So you can and should treat currency pairs as one unit.

There are various factors that can affect the value of a currency pair, one of the biggest factor is the economy. You should always stay updated about the current events in order to make adjustments to your trades and help keep you away from severe losses.

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