Majors, Crosses & Pips

ISO (International Organization for Standardization)

Established in 1947, ISO established a standard for country and currency pair abbreviations. Since foreign currencies are quoted in terms of value of one currency against another, a currency pair consists of an acronym for both currencies, separated by a slash "/".

For example:

GBP = Great British Pound

EUR = Euro

CHF = Confoederatio Helvetica Franc (Swiss Franc)

USD = United States Dollar

CAD = Canadian Dollar

JPY = Japanese Yen

AUD = Australian Dollar

NZD = New Zealand Dollar

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 currency pairs available to trade, such as the Danish Krone, Mexican Peso, and Russian Ruble. However, these pairs are generally traded less, and for these pairs, it is harder to find buyers and sellers. Such currency pairs are called "exotics". Because they have less volume and involve a higher risk for the broker, they typically have a wider PIP spread.

Pips

Market increments are measured in PIPs, or Percentage in Point. A pip is the last digit in the value of a currency pair; 1.3294, 115.13 etc. All currency pairs, except for the Japanese Yen, have 4 decimal places. The Yen crosses only have 2 decimal places.

For example, let's assume a trader buys 1 standard lot of GBP/USD. The current market rate is 1.9615. Essentially this trader is buying EU 100,000 in exchange for $196,150. Again, for examples sake, assume the market rate rose 15 PIPs to 1.9630 and the trader liquidates the position. The same Bu 100,000 is now worth $196,300, the trader realizing a $150 profit.

Majors

Some currency pairs are traded more heavily than others. The currency pairs that have the most volume consist of the "majors". While it can be debated which currency pairs are considered a major, it can be widely agreed upon that the following 6 pairs are:

EUR/USD

GBP/USD

USD/JPY

USD/CHF

USD/CAD

AUD/USD

Nicknames are sometimes used for currency pairs. Here is a list of currency pairs and commonly used nicknames for each:

GBP - Pound, Cable, or Sterling

EUR - Euro

CHF - Swissy, or Franc

USD - Greenback

CAD - Loonie

AUD - Aussie

NZD - Kiwi

JPY - Yen