More about how currencies are traded

Currencies are always traded in pairs in the FOREX. The pairs have a unique notation that expresses what currencies are being traded.

Here are some of the common symbols used in the Forex: USD - The US Dollar; EUR - The currency of the European Union "EURO"; GBP - The British Pound; JPy - The Japanese Yen; CHF - The Swiss Franc; AUD - The Australian Dollar; CAD - The Canadian Dollar. There are symbols for other currencies as well, but these are the most commonly traded ones.

A currency can never be traded by itself. So you can't ever trade a EUR by itself. You always need to compare one currency with another currency to make a trade possible. Some of the common pairs are:

• EUR/USD Euro / US Dollar"Euro"
• USD/JPY US Dollar / Japanese Yen"Dollar Yen"
• GBP/USD British Pound / US Dollar"Cable"
• USD/CAD US Dollar / Canadian Dollar"Dollar Canada"
• AUD/USD Australian Dollar/US Dollar"Aussie Dollar"
• USD/CHF US Dollar / Swiss Franc"Swissy"
• EUR/JPY Euro / Japanese Yen"Euro Yen"

The listed currency pairs above look like a fraction. The numerator (top of the fraction or "left" of the / - however you want to see it) is called the base currency. The denominator (bottom of the fraction or "right" of the/ - however you want to see it) is called the counter currency. When you place an order to buy the EUR/USD, for instance,you are actually buying the EUR and selling the USD. If you were to sell the pair, you would be selling the EUR and buying the USD. So if you buy or sell a currency PAIR, you are buying/selling the base currency. You are always doing the opposite of what you did to base currency with the counter currency.

If this seems confusing don't worry. You can always get by with just thinking of the entire pair as one item. Then you are just buying or selling that one item. Thinking like this will still enable you to place trades. (You only need to be aware of the base/counter concept for Fundamental Analysis reasons - i.e. using various factors to predict currency movements.)

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