Stocks and mutual funds are traded on a centralized exchange, such as the Nasdaq or New York Stock Exchange (NYSE). Any time you buy a currency pairing, you’re buying base currency and selling quote currency. The exchange rate is used to calculate how much you’d have to pay in the quote currency to buy the base currency. For example, in a USD/GBP pairing, USD is the base currency while GBP is the quote currency. When looking at pairings, you may want to consider how they’re ordered. Your profit tied to the currency’s exchange rate, which is the ratio of one currency’s value against another. You want the currency you buy to increase in value so you can sell it at a profit. So you might see Asian or European currencies from the same geographic region being exchanged for one another.įorex trading attempts to capitalize on fluctuations in currency values. Regional pairings: In this category, currencies are paired together based on region.For example, USD may be paired with the Hong Kong dollar (HKD) or Singapore dollar (SGD). Exotics: Here, you’ll typically have pairings of a heavily traded currency against a thinly traded one.Minor pairings: This group also includes many of the frequently traded currencies in the major pairings category, with the exclusion of USD.dollar (USD), euros (EUR), the Japanese yen (JPY), and British pounds (GBP) are typically included. Major pairings: This group includes the most frequently traded currencies.Here’s how foreign currencies are typically grouped: While you could technically exchange any foreign currency that’s traded on the market exchange for another, it’s more common to trade using pre-establishing pairings. dollars and sell British pounds or vice versa.

For a transaction to be complete, one currency has to be exchanged for another. This is done through the foreign exchange market, or “ forex.”įorex trading always happens in pairs. Investing in currency involves buying the currency of one country while selling that of another.

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