Currency Pairs, ISO Abbreviations, and Exchange Rates

Cracking the Code for World currencies involves knowing the ISO Codes and Currency Pairs – which are the basis for buying and selling currencies. Did you know that some currencies have Nick Names?

ISO Codes for Currencies

Currencies, in the FOREX market, are not identified by their full names. Instead, they are referred to by standardized codes that were developed by the International Organization for Standardization (ISO). Some currencies have nick names like Cable, Green Back, Swissy, Loonie, Kiwi and Aussie. The following chart summaries several of the ISO designations, and nick names, for several popular currencies:

Currency Pairs

In the FOREX market trading is always done in currency pairs. In a currency pair, one currency is traded against the other. The currency on the left is called the BASE Currency and the one on the right is called the QUOTED Currency. The following chart illustrates several popular currency pairs:

Exchange Rates

If you travel you understand when you enter another country the value of their currency does not match up to yours. Your currency is either worth more or less than the country you are visiting. When you exchanged your money for their money you were, in that moment, a currency trader. The difference in the value of each currency is the Exchange Rate.

In the FOREX market, two currencies are connected together in Currency Pairs. These pairs reflect the exchange rates between the two currencies. The exchange rate show the ratio, or the value, of one currency against another. The EUR/USD exchange rate specifies how many US dollars are needed to buy one Euro.

Notice, in the chart below, that as one currency strengthens the other, of the pair, weakens. They are inversely related.

Notice, in the chart below, as the value of the EURO (Base Currency) increases the value of the US Dollar (Quoted Currency) decreases and it takes more US Dollars to buy one EURO. Conversely, as the value of the Euro decreases (goes down on the price chart) the Exchange Rate shown on the right side of the chart indicates that it takes fewer US Dollars to buy one Euro.

We always BUY or SELL in terms of the Base currency– the first of the currency pair. In this example, we either BUY or SELL the Euro.

Also notice that the chart is the 15-minute chart. This means that each candlestick represents a 15-min period of time. Traders can view charts, for example, on 1 min, hourly, weekly, monthly time frames, etc.

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3 Responses to “Currency Pairs, ISO Abbreviations, and Exchange Rates”

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