Forex trading basics: The ins and outs of currency pairs

Julie Brownlee, Fsp Invest, 26 May. 2014

Tags: forex trading basics, currency basics, trade forex, currency quotes, currencies, trade currencies, currency pairs, what is a currency pair,

The first step to understanding forex trading basics is that currencies come in pairs. You can’t just trade one. So how does a currency pair work? And what currencies can you easily trade against the rand? So let’s take a closer look at how these currency pairs work…

Currencies comes in twos

Currencies are always in pairs when you trade them. For example, the US dollar and the South African rand (USD/ZAR). This is because the value of one currency determines the value of another by comparison.

Just think about when you go on holiday overseas and buy currency. You’ll get a quote of so many rand to the pound or the dollar, etc. These are examples of currency pairs

So whenever you trade forex, you buy one currency and sell another currency at the exact same time, the FSP Invest experts in The Ultimate Secrets to Forex Trading explain.

How a currency pair works

Let’s look at a quick example…

You decide to buy euros with dollars because you think the price of the euro is going to rise compared with the dollar.

If you’re right and the euro does rise compared to the dollar, you can sell it and make a profit. In other words, you’ll get more dollars back than you initially paid.

When you trade forex, you’re best to think of a currency pair as one unit. One that you buy and sell on the forex market.

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The currencies you can trade against the rand

As you can imagine, there are a huge number of currency pairs on the market to trade. But stick to the most commonly traded ones. This is because you have a higher chance of making a profit as these pairs are very liquid.

The most tradable currencies against the rand (ZAR) include:
  • The US dollar (USD);
  • The euro (EUR);
  • The pound (GBP);
  • The Australian dollar (AUD);
  • The Canadian dollar (CAD);
  • The yen (JPY); and
  • The Swiss franc (CHY).

So there you have it, the ins and outs of currency pairs.

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