Currency Pairs, What Forex Traders Should Know

It is impossible to explain forex trading without mentioning currency pairs. Term “Currency pair” refers to two currencies which is traded one against another. It is written in a mixed codes represent both traded currencies codes.

For example, to represent currency trading of British Pound Sterling against US Dollar, we write and or call it GBP/USD or GBP-USD. Below are several basic things related to currency and currency pairs that every trader should knows.

Currency Codes
The common currency codes used recently are based on ISO 4217. It is a list of standard currency names and code elements established by the International Organization for Standardization.

The first two letters of the code are the two letters of ISO 3166-1 alpha-2 country codes and the third is usually the initial of the currency itself. This coding model has been widely used in many financial companies and activities. We can see that at least it helps eliminating the problem caused by the names dollar, franc and pound being used in many different countries.

Major Currencies
“Major Currencies” usually refer to seven most liquid or most traded currencies in the market. Those seven are US Dollar (USD), British Pound (GBP), Eurozone Euro (EU), Japanese Yen (JPY), Swish Franc (CHF), Canadian Dollar (CAD) and Australian Dollar (AUD).

Minor Currencies
Simply, “Minor Currencies” refer to all currencies other than those major currencies. Following table shows currency distribution of reported market turnover (in %). I captured this from the pdf document of Triennial Central Bank Survey released on December 2007.
Commodity Currencies
In general financial topic “commodity currencies” points to currencies of countries which rely heavily on commodity exports for a major share of their export income. According to IMF studies there are 58 countries which could be included here. In forex trading discussion “commodity currencies” usually refer to the Australian Dollar, Canadian Dollar and New Zealand Dollar

Major Currency Pairs or Major Pairs
Historically, forex is “USD-Centered” by mean that in any currency exchange process the first step had to be a convertion into USD. I’m not sure what the real reason was, it could be related to the world’s economics-reordering after the 2nd World War (which we know has become US-Centered) or probably just for somekind of standardization purpose.

It is probably why in forex trading discussion “currency pairs” often spesifically refers to any pairs which includes the USD. In the opposite, “cross currency” refers to any pairs which doesn’t include the USD.

Then, what is Major Pairs? Some trader use it to refer the seven most liquid pairs: EUR/USD, USD/JPY, USD/CHF,GBP/USD, AUD/USD, NZD/USD and USD/CAD. Some others say that major pairs are only EUR/USD, USD/JPY, USD/CHF and GBP/USD and the other three (AUD/USD, NZD/USD and USD/CAD) are commodity pairs. I think both opinions are acceptable.

Commodity Pairs
As I write above, this term refer to three of the seven most liquid currency pairs:AUD/USD, NZD/USD and USD/CAD. Obviously this classification relate to above definition of “commodity currencies”.

Cross Currency
Also has been noted above, this refer to any pairs which doesn’t include the USD. Cross currencies simplify the process of exchanging currency without any need to firslty convert it into USD.

Currency Pairs Nickname
This is the funny part, some currency pairs have their own nickname. Some are as follow:
Cable for GBP/USD
Euro for EUR/USD
Geppy for GBP/JPY
Loonie for USD/CAD
Kiwi for NZD/USD
Swissy for USD/CHF
Gopher for USD/JPY
Beaver for USD/CAD

“Cable” was given to GBP/USD for a reason that in the old time the synchronization of GBP/USD rate between the London and New York markets were transmitted through a cable running beneath Atlantic sea.

Choosing the Right Day for Forex Trading

Choosing the right time to trade can make a differences between successful and hopeless forex trading.

It’s proved and highly recommended not to trade on Weekday, Mondays, when the Forex market has recently opened and is making first steps to form a new trend and on Friday’s afternoon, during the big volume of closing trades. The best days to trade are Tuesday’s, Wednesday’s and Thursday’s, So Basically trade between Weekdays.

Happy Forex Trading.

14 Forex Tips For You

TIP 1 Read both the books by Mark Douglas which cover trading psychology BEFORE you read or do anything else. If you don’t, I’ll say I told you so when you hit a failure barrier and don’t know why.


TIP 2 Stop loss policy - you MUST have one and practice, more practice and even more practice at sticking to it. It will not be easy but it is an essential discipline to profitable trading.


TIP 3 Trading plan / system. Again, you MUST have one! Then you must practice sticking to it. Do not try and second guess or trade against your indicators - wait until they give you a concise signal before acting on it.


TIP 4 TRADE WITH THE TREND. DO NOT trade against the hourly trend of the market unless you are VERY certain the market has turned. Check this by watching a long term moving average (say 80 SMA on 15 minute chart)


TIP 5 Learn to sit on your hands and not trade! It’s better to wait for good quality trades than take a mediocre one and loose money. A day of no trades is better than a day with one loosing one. If you don’t like the market, just walk away. It will always be there later.


TIP 6 Don’t set yourself false targets and expectations. Trading is not an EXACT science and if you do you will only become frustrated by your failure to meet them. Take what the market gives and be satisfied. Greed will kill you as a trader, both mentally and monetarily. .


TIP 7 The market is rarely your friend in a trade that goes against you. Cut your losses quickly and accept them as an inherent part of trading. You will not be able to trade without some loosing positions. Manage them well!


TIP 8 Try hard not to get out of profitable trades too early. Try operating a trailing stoploss of say 15 to 20 pips behind the trade (on 5 minute timeframe) and maximise your good trades by letting them run. Be patient!


TIP 9 Ensure you fully understand how to generate and use pivot points and camarilla points on your trading platform. These are crucial decision points for daily trading and you will struggle without them.


TIP 10 DO NOT overtrade your account. Read up on money management in trading to make sure you fully understand why this is important and develop a strategy which fits with your personal trading capital. NEVER risk wiping out your account because believe me, it can happen. I’ve done it twice myself!


TIP 11 Learn about FIBONACCI levels and how to apply them to your charts.


TIP 12 Keep your trading system simple. Do not have too much information on your trading screen. It is unnecessary and will only cause you to be confused and delay you making your trading decisions.


TIP 13 Always think in terms of probabilities. Trading is all about thinking in probabilities NOT certainties. You can make all the “right” decisions and the trade still goes against you. This does not make it a “wrong” trade, just one of the many trades you will take which, through probability, are on the “loosing” side of your trading plan. Don’t expect not to have negative trades - they are a necessary part of the plan and cannot be avoided.


TIP 14 Ensure that the candle is fully formed on the timeframe you are trading BEFORE you enter your trade. Trade what you see, not what you would like to see.