Although there are several official currencies in circulation throughout the globe, only a few of them are regularly traded on the FX market. According to some studies, only a few currencies that are most liquid and politically and economically stable are the most desirable currencies for trading. For instance, the USD is by far the most commonly used currency in the world because of the strength and power of the US economy. This article will go through the available forex pairs to trade within the FX market and more.
Key Instructions:
Exchange rates among two or even more fiat currencies are traded on foreign exchange markets.
Transactions are made in currency pairing, including purchasing, selling, and trading.
The US dollar and the Euro are the most prevalent currency pairings, although they may also be found with geographical neighbors like New Zealand And Australia.
How Do Currency Pairs Work?
The fiat currencies of two different nations are paired for buying and selling on the foreign currency exchange (FX) market. The trader will bet on exchange rates for either both currencies or any single one. Transactions, including purchasing, selling, and trading are all done in currency pairing in the FX market.
The euro (EUR), the Australian dollar (AUD), the Swiss franc (CHF), the U.S. dollar (USD), the British pound (GBP), the Chinese yuan (CNY), the Japanese yen (JPY), and the Canadian dollar (CAD) are the eight frequently traded currencies overall (in no particular order).
Particularly, every country's currency is tradeable; however, some pairs of currencies happen more frequently than others. For Instance, the USD is present in every pair of major currencies. However, the FX market has a large number of significant currency pairings.
The term "cross-currency pairings" refers to pairs that don't really trade with the US dollar. To quote some, the Japanese yen and the euro are two common cross-currency pairings.
The Forex Market's Most Active Currency Pairs, Measured by Volume
In the forex market, trading happens with pairs of currencies. There are many forex pairs available in the market to trade with. Mathematically, only eight different currencies can generate around twenty-eight possible currency pairings. However, due to their general liquidity, only roughly 18 currency pairings are typically quoted by the FX market makers. Following are some of the pairs:
USD/CAD EUR/CHF
EUR/USD EUR/JPY
USD/CHF AUD/CAD
GBP/USD EUR/GBP
NZD/USD GBP/CHF
AUD/USD GBP/JPY
USD/JPY CHF/JPY
EUR/CAD AUD/NZD
EUR/AUD AUD/JPY
The bulk of the daily volume in the Forex market is comprised of currency trades involving these 18 pairings in total. As compared to the stock dealing, where hundreds of options are available, trading is simpler because of the manageable quantity of options.