Currency pair
Currency pair is a quotation of two currencies. The currency that goes before the “/” is called as base or transaction currency. And the currency after the “/” is the quote (payment or counter) currency. The currency pair therefore shows the amount of the units of the quote currency required to purchase the one unit of the base currency.
Let’s consider an example: EUR/USD 1.2000 shows that the one Euro costs 1.2 USD. In case the quotation changes to EUR/USD 1.2200 we can say that the Euro grows and he USD becomes lower. And vice versa, in case the quote changes from EUR/USD 1.2000 to EUR/USD 1.9990 we can say about the weakening of the Euro and strengthening of the USD.
Majors
Majors are the currency pairs that are most liquid and traded. Majors trades take about 90 percent of the whole volume of the Forex trading.
The Majors are: EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD and USD/CAD.
Furthermore the GBP/USD is also known as a “Cable”. This name appeared at the time when the London and New York markets synchronized the exchange rate of the currencies by the cable under the Atlantic. However other currency pairs also have their names:
AUD/USD ... "Aussie", EUR/USD ... "Euro"
GBP/JPY ... "Geppy", GBP/USD ... "Cable"
NZD/USD ... "Kiwi", USD/CAD ... "Loonie"
USD/CHF ... "Swissy" USD/JPY ... "Gopher"
USD/CAD ... "Beaver"
Cross Rates
Cross rate is the currency pair without the United States dollar like GBP/JPY. The currency pairs including Euro (EUR/GBP) are usually called as Euro crosses. The rest of the currency pairs that do not include USD or the Euro are usually called cross rates too.
Pips
The term pip is used in Forex markets to define the minimal measure of the price move. Let’s consider following example: the Euro/USD trading changes from 1.5000 to 1.5010 so it means that the currency pair changed by 10 pips. Therefore the pip is nothing but the minimal measure used to define the exchange rate of the currency.
It is possible to find out the value of the one pip. But to do this you will need such information as the actual rate of the currency pair, its trading size and leverage used. Consider such example: the USD with leverage of 1:1000 and trading volume of one lot. The minimal pip in this case will be 10 United States dollars.
Spread
Commonly the currency pair quotation includes two prices. The bid – is the price the trader wishes to purchase the first currency in a pair. The bid is usually lower than the offer (ask) price that is the one the trader wishes to sell the first currency in the pair. Thus spread is the difference between these 2 prices. Let’s consider the following example – the EUR/USD is 1.3607/1.3609 therefore the spread is 0.0002 Euro or 2 pips. Spread trends to be lower in more popular currency pairs. However spreads vary from one brokerage firm to another.
Currency correlation
The strength and direction of a linear relationship of the 2 currency pairs is usually called as a currency correlation. This measure is counted as a correlation coefficient. Moreover the currency correlation can be applied in relation to the correlation between currency pairs and goods, stocks and bonds markets.
