How to Really undertsand the different types of Currency pairs

HOW DOES THIS FINANCIAL MARKET WORKS?

No, in this market you don’t own shares, you don’t have a “ portfolio of assets ”. The Forex consists of pair of currency’s and you as a trader you have to speculate with their value and direction.

The currencys are presented by combined pairs: EURUSD for Euro-Dollar pair GBPJPY for Sterling-Yen pair and 24 other pairs of major and minor currencies combined excluding exotic pairs like USDMXN (Dollar/ Mexican Peso) etc ...

HOW TO REALLY UNDERTSAND THE DIFFERENT TYPES OF CURRENCY PAIRS

There are two groups of pairs: major pairs and minor pairs that make up around 24 pairs. We will trade most of the time in major pairs because they are the most liquid pairs

MAJOR PAIRS

EURUSD, AUDUSD, GBPUSD, USDJPY, USDCHF, USDCAD,NZDUSD

CROSSED PAIRS

Example = AUDJPY = (AUDUSD value X USDJPY value).

This is very important beause many people do not teach this. In fact crossed pairs are not independent pairs such as majors pairs . Crossed pairs are the result of a multiplication of major pairs.

For example right now

AUDJPY = 74.6731 because = audusd (0.71332) x USDJPY (104.684) this mean that you need to be aware that :what happen in audusd or usdjpy will strongly

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affect audjpy. You’re not just trading AUDJPY = you’re indirectly trading the other pairs values involved. This is very important to understand .

MOST LIQUID FOREX PAIRS VS. LESS LIQUID PAIRS

If youre new trading the forex market we advise to start trading in the most liquid pairs , avoid all those exotic pairs with lack of volatility and liquiduidity such as USDNOK , USDMXN, USDTRY etc….

SIMPLE FOREX FOUNDATION

Let’s imagine we have the most famous pair in the forex EURUSD at an exchange rate of 1.0500. This means that to buy a base currency unit (the left one, in this case the euro) requires 1.0500 of the second currency, the US dollar. You will understand more easily this way: 1 euro equals 1.0500 dollar in a time T. If I want to buy 1 eur I need 1.0500 dollar.

You can trade in two sides: (buy / "long") upwards expectation or to the downside (sell / "short"). In these cases, we speculate that the value of the euro against the dollar will rise or fall.

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Here's another example:

Let’s imagine we have the second most famous pair: GBPUSD at an exchange rate of 1,26782. This means that to buy a base currency unit (The left one, in this case the pound) is necessary 1, 26782 of the second currency, the US dollar. In other words it cost me 1.26782 dollars to get 1 pound.

Now let’s imagine that we speculate to open a position assuming that the value will increase after a technical or fundamental analysis, in this case the type of position selected is the buy order or "long" because we speculate and assume that the value of the pound sterling against the US dollar will increase. This can be explained because GBP is getting stronger and USD value against GBP getting weak.

Curiously:Have you ever you wondered why the stock market is represented with a bull and a bear? As the stock market/ forex market it’s a battlefield between buyers and sellers, buyers attack by moving up the price, while sellers attack moving the price down . Similarly, a bear in the attack, he attacks moving his body down while the bull attack raising its horns to the upside. A seller is considered a bear and a buyers is a bull.

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