A currency pair is, literally, a ‘pair’ of two currencies.
When you place any trade on the forex (foreign exchange) market, you do so as part of a currency pair, by speculating on the value of one currency against the other.
You’ll probably have seen currency pairs before. They look like this:
The order of the currencies isn’t random:
When you place a forex trade, you are always trading the price of the base currency against the quote currency.
So, if your pair is EUR/USD, you’re trading the value of the Euro against the US Dollar.
If your pair is USD/GBP, you’re trading the value of the US Dollar against the Euro.
And so on.
If you place a ‘long’ trade on the EUR/USD, then if the Euro increases in value against the US dollar, you will profit. If it decreases in value, you will lose money.
Vice versa, if you place a ‘short’ trade on the EUR/USD pair, and the Euro falls in value against the US dollar, you’ll profit. If it increases in value against the US Dollar, you’ll lose money.
According to data from BIS Triennial Central Bank Survey, the most three most popular currency pairs are:
Risk Warning and Disclaimer: This article represents only the author’s views and is for reference only. It does not constitute investment advice or financial guidance, nor does it represent the stance of the Markets.com platform. Trading Contracts for Difference (CFDs) involves high leverage and significant risks. Before making any trading decisions, we recommend consulting a professional financial advisor to assess your financial situation and risk tolerance. Any trading decisions based on this article are at your own risk.
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