In forex trading, currencies are always traded in pairs. Understanding the different types of pairs - majors, minors, and exotics - is essential for choosing the right markets to trade. Each category has distinct characteristics that affect spreads, volatility, and trading hours.
How Currency Pairs Work
A currency pair shows the value of one currency relative to another. The first currency is the base currency and the second is the quote currency.
Example: EUR/USD = 1.0850
This means 1 Euro (base) equals 1.0850 US Dollars (quote). If you BUY EUR/USD, you're buying Euros and selling Dollars. If you SELL, you're selling Euros and buying Dollars.
Major Currency Pairs
Major pairs include the US Dollar (USD) and are the most traded currencies in the world. They have the highest liquidity, tightest spreads, and most stable movements.
The most traded pair in the world, representing the Eurozone and US economies. Known for its stability and tight spreads.
Known as "Cable," this pair is more volatile than EUR/USD. Popular with day traders seeking bigger moves.
The "Gopher" pair. Sensitive to interest rate differentials between US and Japan. Popular for carry trades.
Other Major Pairs
- USD/CHF - "Swissie" - Safe haven pair
- AUD/USD - "Aussie" - Commodity currency
- USD/CAD - "Loonie" - Correlated with oil prices
- NZD/USD - "Kiwi" - Agricultural exports driven
Minor Currency Pairs (Crosses)
Minor pairs don't include the USD but contain other major currencies. They have slightly wider spreads but can offer good trading opportunities.
Popular for trading European news and Brexit-related events. Generally ranges within tight boundaries.
Known as "The Beast" for its extreme volatility. Can move 200+ pips in a day. Only for experienced traders.
Other Popular Minor Pairs
- EUR/JPY - Good for Tokyo-London crossover
- EUR/AUD - Influenced by commodity prices
- GBP/AUD - High volatility cross
- AUD/JPY - Risk sentiment indicator
Exotic Currency Pairs
Exotic pairs include one major currency and one from an emerging or smaller economy. They have high spreads and volatility, making them challenging to trade.
US Dollar vs Turkish Lira. Extremely volatile, influenced by Turkish politics and central bank decisions.
Other Exotic Pairs
- USD/ZAR - South African Rand
- USD/MXN - Mexican Peso
- EUR/PLN - Polish Zloty
- USD/SGD - Singapore Dollar
Best Pairs for Beginners
If you're new to forex, stick to major pairs:
- EUR/USD - Most stable, tightest spreads, abundant analysis
- GBP/USD - Good volatility for learning, clear trends
- USD/JPY - Smooth movements, respects technical levels
XAUUSD (Gold)
While not a currency pair, gold (XAUUSD) is traded similarly and is extremely popular. It offers high volatility and is considered a safe haven during market uncertainty. Check our XAUUSD trading guide for strategies.
Choosing the Right Pair
Consider these factors when selecting pairs to trade:
- Your schedule: Trade pairs active during your available hours
- Experience level: Beginners should avoid exotics and volatile crosses
- Trading style: Scalpers need high liquidity (majors); swing traders can use minors
- Risk tolerance: More volatile pairs require smaller position sizes
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