Symbols- An arrangement of letters abbreviating a particular currency,
which is globally recognized. The symbol is usually three letters, for
example:
United States Dollar- USD
Great British Pound- GBP
In the Forex market, one currency is always traded against another currency.
For instance GBP/USD- In order to buy Pounds one must sell the equivalent
in U.S Dollars.
Two trading currencies are called a currency pair featuring a base currency,
that is always on the left side of the pair and a secondary currency which is
situated on the right hand side of the pair.
In the currency markets numerous currencies are traded more frequently
than others, making them more liquid and easier to buy and sell. Due to
economic situations, the U.S Dollar has been the most valued currency over
the last couple of decades, making it the most traded currency. To help us
understand which currencies are more popular than others, currency pairs are
divided into different categories.
Majors- Liquid currencies that trade against the dollar.
Crosses- Popular currencies that trade against each other, not including the
USD.
Exotics- Currencies that represent emerging economies. These currencies are
often unique to individual countries.
An excellent example is the Turkish Lira.
Below is a list of commonly traded currency pairs:
EUR/USD, GBP/USD, USD/JPY, AUD/USD, NZD/USD, USD/CAD,
USD/CHF
Bid price- The price at which an investor, trader or institution is willing to
buy the currency price (Bid for the currency).
Ask Price- The price at with an investor, trader or institution is willing to sell
the currency price (Their asking price).
Once the Ask price meets the Bid price the transaction is made.
Spread- The difference between the Bid price and the Ask price. Depending
on the currency pair, the spread will vary.
