Nearly any nation's currency may trade, but some currencies pair more frequently than other money. All of the primary currency pairs contain the USD. There are many major currency pairs within the forex market around the world. As an example, some of the most common currency pairs outside of the Eurodollar are:. There are also currency pairs that do not trade against the US dollar, which have the name cross-currency pairs. Common cross currency pairs involve the euro and the Japanese yen.

Advanced Concepts. Company News Markets News Cryptocurrency News Personal Finance News Economic News Government News. Your Money. Personal Finance. Your Practice. Popular Courses. What Are Currency Pairs? Compare Accounts. Advertiser Disclosure ×. The offers that appear in this table are from partnerships from which Investopedia receives compensation.

This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. Related Terms. Pip Definition, Calculation, and Examples A pip is the smallest price increment fraction tabulated by currency markets to establish the price of a currency pair. dollar and Japanese yen. What Is a Spot Exchange Rate? A spot exchange rate is the rate for a foreign exchange transaction for immediate delivery.

JPY Japanese Yen Definition JPY is the currency abbreviation or the currency symbol for the Japanese yen JPY , the currency of Japan. Reciprocal Currency A reciprocal currency in the foreign exchange market is a currency pair that involves the U.

dollar USD without the USD serving as the base currency. These pairs are not as liquid, and the spreads are much wider. Bank for International Settlements. Accessed Feb. Advanced Concepts. Company News Markets News Cryptocurrency News Personal Finance News Economic News Government News.

Your Money. Personal Finance. Your Practice. Popular Courses. Table of Contents Expand. Table of Contents. What Is a Currency Pair? Understanding Currency Pairs. Major Currency Pairs. Minors and Exotic Pairs. Key Takeaways A currency pair is a price quote of the exchange rate for two different currencies traded in FX markets. When an order is placed for a currency pair, the first listed currency or base currency is bought while the second listed currency in a currency pair or quote currency is sold.

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We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. Compare Accounts. Advertiser Disclosure ×. The offers that appear in this table are from partnerships from which Investopedia receives compensation.

This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. Part Of. Related Terms. Pip Definition, Calculation, and Examples A pip is the smallest price increment fraction tabulated by currency markets to establish the price of a currency pair. dollar and Japanese yen. What Is a Quote Currency? A quote currency, commonly known as "counter currency," is the second currency in both a direct and indirect currency pair.

What Is a Spot Exchange Rate? A spot exchange rate is the rate for a foreign exchange transaction for immediate delivery. What Is a Cross in Finance? A cross is when a broker receives a buy and sell order for the same stock at the same price, so they make the trade between two separate customers. Partner Links. Related Articles. Advanced Concepts The U.

Dollar and the Japanese Yen: An Interesting Partnership. About Us Terms of Use Dictionary Editorial Policy Advertise News Privacy Policy Contact Us Careers California Privacy Notice.

by TradingStrategyGuides Last updated Oct 29, All Strategies 21 comments. You can't just buy or sell a currency, you have to trade them in pairs against each other. So, how do you make sense of this? If you want to sell or "short" the USD, you have to match it up with another currency in order to make a transaction You can't just sell the USD.

You must ALWAYS trade two currencies at one time in a "pair". The Foreign Exchange Market works through currency pairs, so that's the only way we can trade it. And when you think about it, it only makes sense that way; it would be impossible to make a transaction any other way.

Think about it: If I were to go to the currency exchange at my local bank and buy some Euros with my United States Dollars, I'm still using a "Pair of Currencies. Or in other words, I am selling my own money to buy Euros. It works the exact same way in the Forex Market. Now, the tricky thing about Forex can be understanding the order that the pairs are listed in. Understanding the relationship is actually very simple once you get the hang of it.

Remember, you are ALWAYS buying one currency and selling another when you make a transaction or a trade in Forex. Which action buy or sell to which currency first or second can be determined by understanding how the "pair" itself works.

First, a "pair" has 2 parts. Dollar is the QUOTE CURRENCY. Now, we are always Buying going "long" or Selling going "short" a currency pair. You either sell or buy the pair as a whole. Dollars--this is the same thing as going to the Exchange and "selling" U. Dollars for Euros because you are buying Euros against U. You can also read the best strategy on how to use currency strength for trading success. Understanding which currency you are buying and which you are selling is as simple as understanding the fundamentals of how a "Pair" works.

Remember these few things, and you should have no problem determining how to use Currency Pairs: 1. A pair is listed using two different currencies in a given order 2. The first currency listed is the "Base" Currency 3. The second currency listed is the "Quote" Currency 4. Whatever action you take on the pair Directly affects the Base Currency and Inversely effects the Quote currency 5. You are always buying one currency AND selling one currency when you make a trade.

Thanks for reading! Be sure to "Like" my article on Facebook if you did, in fact, like it 🙂 Feel free to leave a comment or questions below! Also, please give this strategy a 5 star if you enjoyed it! We specialize in teaching traders of all skill levels how to trade stocks, options, forex, cryptocurrencies, commodities, and more. Our mission is to address the lack of good information for market traders and to simplify trading education by giving readers a detailed plan with step-by-step rules to follow.

Nice read. I have a question though. Am I selling when it is strong and buying when it is weak? This is the first time I have read about this subject with clarity. Why all majors don't have the USD as their quote currency is something to know about but this is a very good start. Thanks Casey. Hi Casey!!! Simple, easy to understand. It likes so much. The traders need many articles like this. Thank you. Explanation is in layman's terms and I understand it.

Only one question. I'm curious how come USD is not the base for all currencies? I think this article is very well explained. I can trade, mostly badly, but really enjoy it non the less. Well done. Good information but I wanted to know the relationship between different pairs, for example if you are buying EURUSD, will it be prudent to sell USDCHF or USDJPY since in the first eurusd trade you are selling the USD.

Pair info. is great. Hope I can print it off. Also would appreciate a simular one on basics of Forex for us newbies and print able too. Thanks Paul B. good article.. keep posting such knowledgeble thanks glad if u will post some trading strategy thanks in advancee. Thanks for the comment, we will definitely be posting regularly.

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How Currency Pairs Work in Forex by TradingStrategyGuides Last updated Oct 29, All Strategies 21 comments. Forex Trading is weird So how do we make sense of this? When taking one of these actions, remember this: The action you take, whether buying or selling, is done Directly to the Base Currency and Inversely to the Quote Currency.

Here is a Graphic to help explain how currency pairs work: Understanding which currency you are buying and which you are selling is as simple as understanding the fundamentals of how a "Pair" works. You are always buying one currency AND selling one currency when you make a trade Thanks for reading! Author at Trading Strategy Guides Website. Francis says:.

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Be sure to "Like" my article on Facebook if you did, in fact, like it 🙂 Feel free to leave a comment or questions below! I'm curious how come USD is not the base for all currencies? These prices will change over time based on factors that affect currency prices. At least two or three times a week I scan back several years on a particular currency pair. An example of two positively correlated pairs would be EURUSD and GBPUSD. Again, pretty basic stuff but yet essential knowledge if you wish you achieve consistent profits in the Forex market. Pair info.

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