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Why is Forex Trading Done In Pairs? Forex trading is done in pairs, which is basically combining two different currencies into one, for instance, the Euro and the Dollar is EURUSD. There are also known nicknames for currencies, and it is important to get used to them as many analysts love to use those lingos. Here is a quick list for them, the GBP is known as Sterling, Pound, or Cable. The Swiss Franc is known as the Swissy. The Canadian Dollar is known as the loonie, the Australian Dollar as the Aussie, and the New Zealand Dollar is known as the Kiwi, just as the fruit. About 95% of all Forex trading is done with the 8 major currencies, and they are the Aussie, Euro, Kiwi, Loonie, Sterling, greenback, Swissy, and the Yen, and since currencies are traded in pairs, USD or the greenback covers 84% of all exchanges in the world, making the USD a true global currency, which means that the U.S. economy is also important globally as any changes in the political arena could have profound effects globally.

Why is Forex Trading Done In Pairs? ( Courtesy of HenryLiuForex.com )


Why is Forex Trading Done In Pairs?

Since Forex Trading involves two currencies and depending on the order that they are listed, you are usually buying the first currency with the second one if you are going LONG. If you are going SHORT, you are selling the first currency with the second. For instance, when going long for the pair EURUSD, you are exchanging US Dollar into Euro. When going short for the EURUSD pair, you are exchanging the EURO back into the US Dollar. You could also use BUY or SELL when trading Forex pairs, with BUY equals to going LONG and SELL equals to going short.

Why is Forex Trading Done In Pairs? ( Courtesy of HenryLiuForex.com )


Why is Forex Trading Done In Pairs? Therefore, understanding that you are neither really buying or selling a pair, but actually going in one direction or another, it helps to understand the concept of SELLING a PAIR without having inventory first, because you are essentially just exchanging your money, and your account deposit is your starting point for your Forex trading.

Because of the volume in the daily trades, Forex trading is usually done in contracts of 100 thousand, also known as a standard lot. So if you bought 1 standard lot of EURUSD, it means you just exchanged one hundred and forty thousand dollars to one hundred thousand euro, if the current exchange rate is at 1.40. Of course, not everyone has 140,000 USD just to take a trade, brokers offer leverages from 50 up to 500 to 1, giving you the ability to trade 500 dollar worth of trade by depositing only 1 dollar. A 100,000 worth of trade only requires a $200 deposit, enable you to amplify your gains, but at the same time, increase your risks as leverage is a double-edged sword. Why is Forex Trading Done In Pairs? ( Courtesy of HenryLiuForex.com )


Why is Forex Trading Done In Pairs?

Of course, there are many brokers tailored for the retail traders, and they offer smaller lot sizes, which gives you more flexibility in your trading. Forex trading could be done with these brokers at mini and micro lots, of 10,000 and 1,000 units, respectively, while keeping the same leverage. Imagine that you can trade a 10,000 lot by just putting done twenty dollars, with a potential return per each pip at 1.00, or just 20 pips of movement will give you 100 percent return on your investment. With the market moving hundreds to thousands of pips a day, you can certainly see the potential for return. Why is Forex Trading Done In Pairs? ( Courtesy of HenryLiuForex.com )


Forex Currency Pairs