In the Forex market, a currency is exchanged for another. Yet, how are these currencies quoted? The International Standards Organization (ISO) has set out the three-letter code of every world currency. The first two letters in most cases are the same as the country name, while the third letter denotes the currency name. An example is that of the British Pound, in the Forex market it is quoted as GBP. The first two letters refers to the Great Britain, whilst the last letter refers to Pound. Considering one currency is traded against the other currency, a Forex pair is quoted as follow; if Euro is traded against US Dollar then the quotation would be EUR/USD or EURUSD.

The Most Traded Currencies in Forex

Now that a quotation of a Forex pair is clarified, the next step is to get familiar with some of the most traded currencies in the world. The following eight currencies are the commonly traded, as they account for over 85% of the daily traded volume in the Forex market.

  • United States dollar (USD),

  • Euro (EUR),

  • British Pound sterling (GBP),

  • Australian dollar (AUD),

  • Japanese yen (JPY),

  • Swiss franc (CHF),

  • Canadian dollar (CAD),

  • New Zealand dollar (NZD).

The Most Liquid Forex Pairs

Liquidity is a term in Forex that you will come across often. It basically describes that an asset, security or currency can be bought or sold in a quick manner, whilst not impacting its value or price. The Forex pairs listed below are not necessarily the best FX pairs to trade, but they are the ones that have high liquidity. Also, these Forex pairs are involved in the majority of exchange transactions:

1

EUR/USD (euro versus U.S. dollar)

2

USD/JPY (U.S. dollar versus Japanese yen)

3

GBP/USD (Great Britain pound versus U.S. dollar)

4

AUD/USD (Australian dollar versus U.S. dollar)

5

USD/CHF (U.S. dollar versus Swiss franc)

6

USD/CAD (U.S. dollar versus Canadian dollar)

7

NZD/USD (New Zealand dollar versus U.S. dollar)

Another interesting note is that the above-mentioned Forex pairs are associated with countries that have greater financial power, but also a high volume of trade conducted globally.

List of Exotic Forex Pairs

Aside from these major pairs there are also special pairs, the so-called exotic currencies. These pairs are characterized by relatively, low trading volumes, high volatility and high spreads. Notably, trading such pairs involves higher degrees of risk as well as higher possible profits. Below is a list of some exotic Forex pairs:

  • EUR/TRY (Euro/Turkish Lira)

  • USD/TRY (US Dollar/Turkish Lira)

  • USD/SEK (US Dollar/Swedish Krona)

  • USD/MXN (US Dollar/Mexican Peso)

  • USD/NOK (US Dollar/Norwegian Krone)

  • USD/ZAR (US Dollar/South African Rand)

  • USD/HKD (US Dollar/Hong Kong Dollar)

  • USD/DKK (US Dollar/Danish Krone)

  • USD/SGD (US Dollar/Singapore Dollar)

  • USD/THB (US Dollar/Thailand Baht)

This is list is not complete, as there are more exotic Forex pairs. The point is that trading these exotic pairs isn’t for everyone. Trading these currencies require endurance, an additional knowledge of geopolitical and economic impacts. Therefore, many new traders start to trade with more stable Forex pairs that have high liquidity, such as EUR/USD, GBP/USD and the other Forex pairs mentioned in the sub-chapter “The Most Liquid Forex Pairs”.

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