Understanding Forex Currency Pairs: Major and Minor and Other Types

Understanding Forex Currency Pairs: Major and Minor and Other Types

Forex trading involves the simultaneous buying of one currency and selling of another. This system forms the foundation of the foreign exchange market, the largest and one of the most intricately connected financial markets globally. The importance of currency pairs cannot be overstated, particularly for those participating in the market. These can include both individual traders and large financial institutions. Let’s understand why Forex currency pairs hold significant weightage when it comes to forex and currency trading.

What Are Forex Currency Pairs?

At its core, a forex currency pair is made up of two currencies. This pairing facilitates the comparison of one currency’s value against another. The first currency listed, known as the base currency, is quoted with the second currency, called the quote currency.

For instance, in the EUR/USD currency pair, EUR is the base currency and USD is the quote currency, indicating that the pair shows how many U.S. dollars (the quote currency) it would take to buy one euro (the basecurrency).