A STILL WATER UNDERSTANDING OF CURRENCY PAIRS

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Good day to you all wonderful and hardworking members of this community i know it has been a while but I also know you know who it is, it is your favorite blogger @awesononso.

Here in the vast and intricate world or realm of forex trading we have currency pairs, currency pairs serve as the cornerstone and pillar of transactions,it is also representing the fundamental and basic units of exchange in the global and world wide marketplace.

As such it is very important that one has a very clear understanding of the basics and concept of currency pairs especially for the aspiring and soon to be forex traders seeing as it forms the foundation and pullar upon which all forex trading activities are built.

Basically in this well prepared post that I @awesononso thoughtfully made, I will be considering and discussing what currency pairs are also touching the and elucidating their composition, classification, notation, and significance in the dynamic and ever changing landscape of the foreign exchange market.

WHAT ARE CURRENCY PAIRS

Basically a currency pair is a representation or a quotation that represents and depicts the relative and compared value of one particular currency against another particular currency in the forex market.

Meaning that each currency pair consists or is made up of two currencies, known as the base currency and the quote currency, which are denoted or written as a three letter code as set or defined by the International Organization for Standardization (ISO).

Also please note that in a currency pair, the first currency listed or written first is known as the base currency, while the second currency is known as the quote currency.

For example, in the currency pair EUR/USD, the euro (EUR) is written first so it is the base currency, and the US dollar (USD) comes last so it is the quote currency.

And the exchange rate indicates how much of the quote currency is needed to purchase or much of it is equal or equivalent to one unit of the base currency, take for example, if the EUR/USD exchange rate is 1.20, it means that 1 euro is equivalent to or equal to 1.20 US dollars.

CLASSIFICATION AND SIGNIFICANCE OF CURRENCY PAIRS

Typically the currency pairs are classified into three main categories and these categories are based on different factors which are; their liquidity, trading volume, and global significance, and they are as follows;

Major Currency Pairs: Basically these pairs comprises and is made up of the most widely and vastly traded currencies in the world and they include combinations and pairs such as the EUR/USD, USD/JPY, GBP/USD, and USD/CHF.

Minor Currency Pairs: This classification is also known as cross currency pairs, these basically are the currency pairs that do not include the US dollar and consist of two major currencies, such as the EUR/GBP, EUR/AUD, and the GBP/JPY.

Exotic Currency Pairs: These are categories of currency pairs that are only involved or made up of one major currency and one currency from an emerging or smaller economy, such as the USD/TRY (US dollar/Turkish lira) or EUR/SEK (Euro/Swedish krona).

Currency pairs as I have mentioned or implied earlier plays a very pivotal and crucial role in supporting and facilitating international trade, investment, as well as financial transactions.

They also contribute and provide a mechanism for businesses, investors, and governments to exchange currencies and conduct and carry out transactions across borders and as matter of fact enabling the seamless flow of goods, services, and capital in the global and worldwide economy.

CONCLUSION

In conclusion, currency pairs are the building blocks that makes the foundation and great building that is the forex market, it also represents the relative value of one particular currency against another.

Understanding the basics and fundamentals of currency pairs is essential for forex traders, as it enables and allows them to analyse and research exchange rate movements, make proper and informed trading decisions, and navigate the complexities of the global currency market.