If you are looking for invaluable insights on currency pairs, which are an important part of foreign exchange, this information will surely be of great use to you.

Before we read any further, it is important for us to note that currencies of the world are traded in pairs. For example - In pair EUR-USD, the currency used as the reference (USD) is the counter or quote or settlement currency and the currency quoted in relation (EUR) is the base or transaction currency.

The term base currency in the forex segment is also used as the accounting currency by banks, and is generally the domestic currency. It is also important to note that currency pairs that don't involve the United States Dollar, USD, are termed as cross currency pairs like GBP/JPY and currency pairs that involve the Euro are termed as euro crosses (like EUR/GBP).

The four major currency pairs in the forex market are EUR-USD, GBP-USD, USD-JPY, and USD-CHF. The pair, EUR-USD, is the most popular and has the highest volume of transactions as more than 70 percent of forex world transactions are based on this pair.

For private forex traders, the currency pair GBP-JPY is the King due to its strong nature, sharp trading signals, wide movement scale, and volatile approach. The pair of EUR-USD is the most liquid among all pairs since it has the highest trading volume; the most volatile and active pair is GBP-JPY. USD-SEK (Swedish krona), USD-DKK (Danish krone), and USD-NOK (Norwegian krone) are termed as exotic currency pairs because of their pip value, which is smaller when compared to other currency pairs such as EUR-USD. Some of the other exotic currency pairs are EUR-NOK, EUR-SEK, EUR-DKK and GBP-NOK, GBP-SEK, and GBP-DK.

Currencies are traded in fixed contract sizes called lots and the size of a standard lot is 100,000 units of the base (or transaction) currency though some forex brokers also offer mini lots of 10,000 units.

The best part about currency pair trading is that you can sell even before you actually buy it. Let us understand this with the help of an example.

Suppose, you are planning to buy Euros with US Dollars and have traded for the currency exchange, the actual payment will be made from your account after a certain time and not instantly. Now that you have purchased Euros, you can sell them (remember, you have still not paid for them) if you notice an upward movement in the exchange price of Euros. But loss may come your way if the value of Euros, during these times, falls.

One thing that you should always consider while getting engaged in forex is that you need to sell high and buy low and profits can come your way even if you sell a currency low and buy it lower than what you sold it for.

By remembering these insights on currency pairs, you can surely stay ahead of the rat race and become a successful trader who is good not only at maximizing profits but also reducing losses.