Since foreign currencies are quoted in terms of value of one currency against another, a Forex currency pair consists of an acronym for both currencies, separated by a slash "/". The acronyms used were established in 1947 and we have listed a few below:
Currencies are always traded in pairs, for example EUR/USD, USD/JPY. Every position requires the buying of one currency and selling of another. When someone says they are "buying the EUR/USD", they are buying Euros and selling Dollars.
There are many other Forex currency pairs available to trade, such as the Danish Krone, Mexican Peso, and Russian Ruble. However, these currency pairs are generally traded less, and are not considered major currencies.
Some Forex currency pairs are traded more heavily than others. The currency pairs that have the most volume consist of the "majors". It is widely agreed that the following 6 pairs are considered the majors:
For example, let's assume a Forex trader buys 1 standard lot of GBP/USD. The current exchange rate is 1.9615. Essentially this trader is buying 100,000 Pound in exchange for $196,150. Again, for example's sake, assume the Forex market rate rose 15 PIPs to 1.9630 and the trader liquidates the position. The same 100,000 Pound is now worth $196,300, the trader realizing a $150 profit.
Nicknames are sometimes used for currency pairs. Here is a list of Forex currency pairs and commonly used nicknames for each: