Forex pairs
Family I · Instruments
Not to be confused with major currency pairs, major forex pairs, exotic currency pairs.
Forex pairs are the tradable instruments of the foreign exchange market, each consisting of a base currency and a quote currency written as a single symbol such as EUR/USD. The quoted price states how many units of the quote currency are required to purchase one unit of the base currency. Every pair therefore expresses a relative value, not an absolute one, and moves when either side of the ratio changes.
Structure and quoting convention
A pair is written BASE/QUOTE. In EUR/USD, the euro is the base and the US dollar is the quote; a price of 1.0850 means one euro costs 1.0850 US dollars. Buying the pair means buying the base and simultaneously selling the quote, and selling the pair does the reverse.
Pairs are grouped by liquidity and by the currencies involved. The most heavily traded combinations, generally those linking the US dollar with other large reserve currencies, sit in one group; combinations involving a major currency and a smaller or less liquid one sit in another. The precise membership of these groups is a market convention rather than a regulatory definition, and different sources classify borderline cases differently.
Worked example
The gain is denominated in the quote currency because the base currency amount was fixed at entry. Had the rate fallen, the same arithmetic would produce a loss in US dollars.
Costs and conventions that vary
The spread, commission, leverage limit, settlement convention and trading hours attached to a pair are set by the venue, the broker and the local regulator, so they differ between accounts and jurisdictions rather than following one universal figure. Some pairs trade around the clock during the working week; others are thin outside the overlapping hours of their home markets. Quoted prices are indicative until a trade is executed, and the rate actually filled can differ from the rate displayed.
Often confused with
- major currency pairs
- Major currency pairs are the subset of forex pairs formed by the most liquid currency combinations, whereas forex pairs covers every quoted combination including minor and exotic ones; the visible sign is whether the symbol contains two of the small set of heavily traded currencies or at least one less liquid currency.
- major forex pairs
- Major forex pairs is the same subset as major currency pairs, used as a naming variant, while forex pairs is the wider category; the visible sign is that a major forex pair symbol pairs the US dollar with another top-tier currency, and anything else falls outside it.
- exotic currency pairs
- Exotic currency pairs are forex pairs that combine a major currency with the currency of a smaller or emerging market, so they are a subset of forex pairs rather than a synonym; the visible sign is a symbol such as USD/TRY or USD/ZAR, where one leg is not among the major currencies.