Currency Pairs & PIPS
Currency pairs are an equation of two currencies trading against each another. On a day to day basis, people convert their money to different currencies for various reasons. While one might buy Pounds or Euros for an investing point of view, another might buy the same currency just to purchase goods abroad. We often find ourselves buying a foreign currency when traveling abroad. Even though the reasons behind buying currencies tend to differ, on each example explained throughout this tutorial the same actions were done; the holding currency was sold and the desired currency was purchased.
Similar to the examples above a currency trader executes the same action. A currency trader trades currency pairs by buying one currency and selling another.
For example, if a currency trader buys Euros and sells Pounds, he/she is expecting the Euro to increase. Once the currency pair increases the trader will buy back his/her Pounds yielding the difference in profit (further examples will be explained in following chapters).
On the currency market currencies are abbreviated and then combined together, to form an equation. This allows traders to choose various pairs that they wish to trade.
Currency pair examples: EUR/USD, GBP/USD, AUD/USD
On the previous example one can see that each pair contains two currencies that are abbreviated into three letters, for example:
United States Dollar- USD
Great British Pound - GBP
Each currency pair consists of a major currency and a secondary currency. The Major currency is always on the left side of the pair, for example:
Major Secondary
EUR/USD
Each currency pair is quoted by a market price. That price fluctuates as it is affected by supply & demand.
EUR/USD= 1.3245 (1 EURO = 1.3245 Dollars)
Types of currencies:
In the currency market certain currencies are traded more frequently than others, making them more liquid and easier to buy and sell, due to their mass volume. Even though the EURO has gained mass popularity over the last couple of years as a dominant currency, the U.S Dollar is still classed as the most valued currency, making it the most traded currency. To help us understand which currency pairs are more popular than others, currency pairs are divided into different categories:
Majors- Liquid currencies that trade against the U.S Dollar.
Crosses- currency pairs that do not including the USD.
Exotics- Currencies that represent emerging economies. These currencies are often unique
to individual countries.
An excellent example is the Turkish Lira or the Mexican Peso. 
