When trading currencies, you actually buy one currency and sell another. One more way to explain this is that you are actually betting that the value of one currency will rise (or fall) against the other. The most traded currency pair is EURUSD where EUR (first currency) is the base currency and the USD (second currency) is a counter currency. Here is a picture that explains what happens when you look at the EURUSD chart:
When you look at the blue line between number 1 and 2, you will see that the line goes up, which means that the EUR becomes stronger against the USD. The line between 2 and 3 indicates that the EUR is weakening, then the EUR is becoming stronger again (3-4) and so on. This is actually the way to make money in Forex – you have to be able to preddict future movement of currencies.
The currency pairs in the table below are called “majors”. These are the most liquid pairs (most traded) and they all have U.S. Dollar as base or counter currency:
The list below shows “minor currency pairs” that contain one of the three major non-USD currencies (EUR, GBP and JPY). Some of them are:
Here are a few exotic currency pairs: