On the forex market, exchange rates are expressed as the relative value of a currency unit against one unit of another currency.
Example: EUR/USD 1.1500 means that 1 euro is exchanged for 1.1500 US dollars (1 dollar and 15 cents).
In the example above (EUR/USD 1.1500), the euro is the base currency, and the U.S. dollar is the quote currency.
Currency pairs are generally written using the ISO 4217 currency codes. This means that the United States dollar is USD, the euro is EUR, the Canadian dollar is CAD, and so on.
Separating the two currencies using a slash sign (EUR/USD) is common, but can be omitted (EURUSD) or replaced with a dot (EUR.USD) or a dash (EUR-USD).
The most traded currency pairs in the world are called the majors.
Right now, these are the majors:
Roughly 85% of the total foreign exchange market comprises the majors, and they all have very high liquidity. This high liquidity has caused many trading platforms to lower their commissions (or similar fees) for the majors.
Of the majors, the EUR/USD tend to have the fastest trade execution, the lowest spreads, the lowest (or no) commission for opening a trade, and the lowest commission for keeping a position open overnight.
Cross currency pairs
A lot of the frequently traded currency pairs involve the USD. Currency pairs that do not include the USD are called cross-currency pairs.
Two examples of commonly traded cross-currency pairs are GBP/JPY and EUR/GBP.
Cross-currency pairs that involve the euro are commonly known as euro crosses.
Nicknames for certain currency pairs
- GBP/USD is nicknamed cable. It´s a remnant from when the Atlantic Ocean communications cable synchronized the GBP/USD quotes between London and New York City.
- Inspired by “cable”, the new currency pair EUR/USD was nicknamed fiber.
- EUR/GBP is nicknamed chunnel, after the Channel Tunnel that connects the UK with continental Europe.
- EUR/CHF is nicknamed Euro-Swissy or simply Swissy.
- AUD/USD is nicknamed Aussie.
- NZD/USD is nicknamed Kiwi or The Bird.
- USD/CAD is nicknamed Loonie or The Funds.
- USD/RUB and EUR/RUB are sometimes called Barney and Betty, respectively, a reference to Barney and Betty Rubbles in the TV show The Flintstones. Using the nickname, Betty can cause misunderstandings, however, because in London, Betty is cockney rhyming slang for Cable (Betty Grable = Cable).
- USD/JPY is nicknamed Gopher.
- GBP/JPY is nicknamed Guppy.
- EUR/JPY is nicknamed Yuppy.
The 27 most traded currency pairs by volume in 2020
- 1. USDJPY
- 2. GBPUSD
- 3. AUDUSD
- 4. USDCAD
- 5. USDCHF
- 6. NZDUSD
- 7. EURJPY
- 8. GBPJPY
- 9. EURGBP
- 10. AUDJPY
- 11. EURAUD
- 12. EURCHF
- 13. AUDNZD
- 14. NZDJPY
- 15. GBPAUD
- 16. GBPCAD
- 17. EURNZD
- 18. AUDCAD
- 19. GBPCHF
- 20. AUDCHF
- 21. EURCAD
- 22. CADJPY
- 23. GBPNZD
- 24. CADCHF
- 25. CHFJPY
- 26. NZDCAD
- 27. NZDCHF