Important forex definitions

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terms in an article. However, the following terms are some of the most important forex-related definitions to become familiar with when trading online:

Pip – the lowest increment at which a currency pair is valued.

Spread – the difference between the buy/sell price (bid/ask) of a currency pair.

Leverage – allows you to trade larger amounts with less capital, meaning potential profits or losses are doubled. So a leverage of 1:50 means you need $200 to trade a $10,000 trade.

Exchange rate – the value of the base currency against a quoted currency.

Question – The “bid price” that traders use and quote when intending to buy an asset. Therefore, this price should normally be higher than the market price.

Nicknames for forex pairs

In addition to the definitions above, it can also be useful to know the nicknames of popular forex pairs.

The sterling pair against the US dollar (GBP/USD) is called the “cable,” a term that originated in the mid-19th century. This is because the US Dollar and British Pound are exchanged using an underwater communications cable.

The EUR/USD, the world’s most traded forex pair, is called “fiber,” a term that appeared with the introduction of the euro.

The USD/JPY currency pair is known as the “Ninja” trade because Ninja hails from Japan, the home of the Japanese Yen.

USD/CHF is called “Swissy” and USD/CAD is called “Loonie”. That’s because the $1 Canadian dollar has an image of a unicorn bird on its back.

The US Dollar/Russian Ruble pair is called Barnie and the Euro/Russian Ruble is called “Petit”. These names refer to the animated series The Flinstones, in which the main characters’ neighbors Betty and Barney are named Rubble, a pun on the Russian ruble.

Popular forex trading pairs

Most forex trading is settled against the US dollar, which has long been considered the official base currency of the world. As mentioned above, all major currency pairs (or major pairs) are traded against the US Dollar and they are generally considered to be the most popular currency pairs to trade. Several cross currency pairs (or crosses) are also seeing strong trading flows including EUR/CHF, EUR/GBP and AUD/JPY to name a few.

 

In general, the most commonly traded currency pairs are:

 

EUR/USD – this is the most traded pair with the highest volume and lowest liquidity.

GBP/USD – It is a popular currency pair that tends to be more volatile than EUR/USD. Volatility in the GBP/USD pair has been higher lately due to the impact of “Brexit” and the resulting economic uncertainty.

USD/JPY – This is the second most traded currency pair after EUR/USD. It is significant in volume due to the size of the Japanese economy and its role in global economic trade. Due to its geographic location, trading the Japanese Yen can also reflect economic and geopolitical conditions in the wider Asian region. In addition, the seven major pairs account for more than 80% of all forex trading.

 

In short, cross pairs are currency pairs that do not include the US dollar, such as B. EUR/GBP, AUD/NZD and EUR/CHF. Exotic currencies are major currencies that are paired against a smaller and less liquid economy, such as the US. B.

 

The world of forex offers a variety of forex pairs to trade. While the freedom of choice and endless opportunities can help diversify your profile, it can also make for an overwhelming trading experience. Therefore, before deciding to trade forex, you should consider your trading strategies, market movements, and other factors that may affect your position.

 

While there are many ways to choose the best currency pairs to trade, here are some quick examples to follow when choosing a currency pair to trade:

 

Watch the past. View currency pairs’ historical movements to try to follow the trend, or get a high-level view of this pair’s possible movements. However, remember that while reviewing past trends can be useful for your trading strategyI may be, but is not necessarily indicative of future performance.

You can test your strategy with either a popular forex pair or your local currency against the US Dollar on a free unlimited demo account and You have to memorize a trend and its movement in order to be able to trade it

Always be careful and serious in your trades and open small trades at first to carefully monitor the evolution of the market over time.

Plus500 offers the world’s best CFD trading method. This user-friendly and advanced online CFD platform includes a free demo account and a variety of educational resources and trading tools available to both new and experienced traders. Our spreads are among the lowest in the industry and the intuitive platform is designed for ease of use without compromising deep analytical insights and complex trading options.

 

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