How Currencies are Named in the Market?

To learn the forex currency pairs naming formats used in the forex market we shall first look at how forex currencies are named and then look at how forex currency pairs are named. Understanding these forex currency pairs naming formats is one the forex basics as currency pairs are the main instruments being traded in the forex market.

Naming Format of Currencies

The naming format of currencies has three letters, explanation of each letter is shown below:

First two letters - identify name of country

Last letter - identify the currency

Example:

USD= USA Dollar

This currency name is also commonly referred to as a symbol, thenceforth for USA Dollar, the currency name or currency symbol is USD.

Example of Other Currency Symbols in FX Trading

Example of Currency Symbols - Currency Symbols Explained - Currency Pairs Naming Format Explained

How Currencies are Transacted in the Market?

Forex is the buying of one currency with another currency, exchanging the money for a different currency of the same value, through a bank or a broker, who acts as the custodian.

Since one currency is traded for another, each forex trade is exchanged in pairs of two - called a currency pair, e.g., EUR/USD. When a trade transaction is made it is the simultaneous buying of one currency & automatically selling the other currency. So if you buy EUR you automatically sell USD and vice versa.

Explanation of How The forex Currency Pair EURUSD is Traded:?

To exchange EUR for US Dollar, we use the EURUSD currency pair - currency symbol

EURUSD currency pair symbol is used to facilitate business between the European Union and United States. However, in the Market these currency pairs are globally available for anyone to freely trade with and speculate with - because these forex currencies have been floated freely in the interbank exchange market. As long you have the capital to speculate with in the forex market you as a forex trader can buy & sell these forex currencies online.

In this case The EUR is the base currency and USD is the quote currency.

The base currency is always 1 unit, & the exchange rate quote is in terms of the quote currency.

Therefore, if exchange rate of EURUSD currency pair = 1.50000, it means 1 Euro = 1.5 US dollars. So for every 1 Euro you've, you as a trader can buy 1.5 dollars.

In Forex trading, you as a forex trader can not buy 1 or 2 dollars, you as a trader can only buy a minimum of 1,000 units of currency, which is a micro lot. The standard unit of trading is called 1 standard lot or 1 contract. 1 contract is equivalent to 100,000 units of currencies. The forex contract can also be divided into smaller contracts called mini lot = 10,000 units of currency and micro lot = 1,000 units of currency.

Because the USD or $ is the most popular/liked currency in the Market, most traders will refer to the standard contract as equal to $100, 000. Also because most forex accounts used by investors and traders are Dollar Accounts ($), then 1 standard lot of 100,000 units (Dollars) will also be equal to $100,000.

FX is traded using currency contracts provided by a online broker. A contract represents the standard units used in forex trades. The Quote Price commonly referred to as the exchange rate is the price at which one buys or sells in a particular trade.

Because 1 contract is equal to $100,000 units of currency and most people can't afford, the Forex broker provides you leverage to trade with. When a broker provides you leverage of 100:1 it means that you as a trader can buy or sell 1 contract with $1000 of your money. This is because forex leverage 100:1 means the broker gives you 100 dollars for every $1 you have on your account. So if you have $1000 in your account the broker provides you leverage 100:1 you get - 1000*100= $100,000 to trade with.

Examples of Currency Symbols/Quotes on MetaTrader 4 Software Platform

Examples of Currency Quotes on MT4 Software Platform

Showing Currency Pairs Quotes in the MT4 Software

Once you open the MetaTrader 4 platform software you may find that some forex currency symbols are not listed on the MT4 Market Watch Panel Window . So, now you'll begin saying - oh, my broker only provides 5 currency symbols, I wanted to trade the EURJPY currency pair which is one of my most popular pairs - but my broker does not provide it on their MT4 platform software - well before you change your broker, we will show you where to retrieve that currency pair you want and are looking for, & show you where your broker has hidden it.

MT4 Market Watch Panel Window - (MetaTrader 4 Short-Cut Key CTRL+M) - to open MT4 market-watch window just use the short cut key CTRL+M

For Example you may open the MT4 and only get the EURUSD currency just as is shown below:

EURUSD Currency Pair Symbol - Showing Currency Pair Quotes in the MT4 Software

To show a list of all available forex currency symbols on the MT4 platform software follow the steps described below:

How Do I Display and Show all the Forex Currency Symbols Available on the MetaTrader 4 Software Platform

All the forex symbols available will be shown the same way as the MT4 symbols example below:

Listing of all Available MT4 Symbols Shown on the MetaTrader 4 Platform Software

From the above list of all forex symbols, a trader can choose the forex currency pair they want to trade, by right clicking on any symbol, then selecting "open chart". Once the forex chart is opened a trader can then open a trade for the newly selected currency symbol using the forex chart that is opened.

Once you have selected all the forex currency pairs that you want, you may want to hide all the other currency symbols that you're now not trading. To hide those forex currency symbols that you're not interested with, follow the steps shown below:

How to Hide Quotes on MetaTrader 4 To Save Internet Bandwidth

Hiding of currency pairs is done so as to save internet bandwidth that the MetaTrader 4 platform software is using. There is no need of streaming price quotes of 50 forex currency symbols if you're only interested in 1 or 2 forex currency symbols, you only need streaming prices for the 2 forex currency symbols only.

For example if you only trade the Forex major currency pairs, you as a forex trader can choose the show all the forex currency symbols, then choose all the 4 major currency pairs - EURUSD, GBPUSD, USDJPY and USDCHF, open their charts & then choose hide all after opening the forex charts for the currency pairs that you as a trader want to trade. That way you will only receive streaming price quotes for these 4 currency pairs instruments only.

Calculating FX Profits in the forex market

1 contract gives a profit of $10 for every 1 pip movement.

1 pip is the minimum movement in price exchange rate, & it is equal to 1 hundredths (1/100) of 1 cents, or the equivalent of 0.01cents.

Note: there is now the fractional pips, the fractional pips is the fifth decimal point in a price quote, but this fifth decimal point is not the forex pip, the forex pip is the fourth decimal point.

So if you have opened 1 contract and the exchange rate moves by 0.01 cents you make profit of $10.

If the exchange rate moves by 1 cents and you have opened 1 contract, your profit will be $1,000, because 1 cents movement is equivalent to 100 pips and 1 pip profit per lot is $10.

Because most forex currency pairs move less than 1 cents a day, on average 1 contract can yield a profit of below or just about $1,000 in a day depending on the amount of forex pip movement.

If a currency pair moves 20 pips in your favor you'll make $200 dollars with 1 standard contract and if the same currency pair moves 50 pips in your favor you'll make $500 dollars.

This is how profits are generated in the currency market.

Likewise, If a currency pair moves 20 pips in the opposite trend direction of your open trade will lose $200 dollars with 1 standard lot and if the same currency pair moves 50 pips in the opposite market trend direction of your open position you will lose $500 dollars.

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