Compare Minor & Major Currency Pairs

Currency pairs are one of the most popular instruments used by traders in the foreign exchange market. Foreign exchange pair allow traders to use the best forex trading platforms and speculate on the exchange rate between two different Pairs of currencies traded on the foreign exchange market and take advantage of price movements in different markets.

This article provides a comprehensive guide to understanding the different financial instruments Vs forex, including their origins, key features, and how to trade them successfully. Get started today and learn about the fascinating world of currency pairs forex!

What Are Forex Currency Pairs?

Currency pairs are the most widely traded financial instruments in the world. They represent the exchange rate between two different currencies and are used to speculate on the relative strength of the two currencies. Currency can be categorized as major, minor or exotic, depending on their liquidity and trading volume. If you decide to move from Forex to CFDs, then find the best CFD brokers here.

Major foreign currency pairs include the US Dollar and Euro (EUR/USD), the British Pound and US currency pair (GBP/USD), and the Japanese Yen and US Dollar (USD Vs JPY currency pairs). Minor currency pairs include the Euro and Canadian Dollar (EUR/CAD) and the Australian Dollar and US Dollar (AUD/USD).

The table below gives a brief overview of this currency, their history, characteristics, and average daily range for pips.

All other currencies are subject to market conditions and can fluctuate in value. For this reason, it’s essential for traders to stay informed about economic and political events that can impact the exchange rate.

The table below gives a brief overview of these FX pairs, their history, characteristics, and average daily range for pips.

MOST POPULAR Traded Currency Pair	History	Characteristics	Average Daily Range (pips)
EUR/USD	Reflects the economic conditions of the European Union and the United States.	High volatility, known as barometer of global economy, sensitive to interest rate differentials, economic indicators and actions of ECB and Fed	90-120
USD/JPY	Reflects the economic conditions of Japan and the United States	Known as safe-haven assets, High liquidity, low volatility, sensitive to interest rate differentials, economic indicators and actions of BOJ and Fed	40-60
GBP/USD	Reflects the economic conditions of the United Kingdom and the United States	High-risk, high-reward, sensitive to interest rate differentials, economic indicators, and geopolitical events, known as cable.	70-100
USD/CHF	Reflects the economic conditions of Switzerland and the United States	Known for correlation with EUR/USD, low volatility, sensitive to interest rate differentials, economic indicators, and geopolitical events, known as Swissie.	45-65

By having an understanding of these actively traded currency pairs, traders can make informed decisions when entering the foreign exchange market. It’s also essential to keep an eye on market conditions, such as political and economic events, that can impact the exchange rate of these currency pairs.

How currency pairs are quoted?

Understanding how currency pairs are quoted and the conventions used is essential for any trader looking to participate in the Forex market. In this article, we’ll take a deep dive into how pairs are quoted, including an explanation of the bid-ask spread and alternatives to it.

When trading The most common convention used in the Forex market is the “bid-ask spread.” The bid price is the highest price a buyer is willing to pay for a currency, while the ask price is the lowest price a seller is willing to accept. The difference between the bid and ask price is known as the bid-ask spread.

For example, if the EUR/USD currency pair has a bid price of 1.2050 and an ask price of 1.2055, the bid-ask spread would be 0.0005. This means that a trader would have to pay 1.2055 to purchase 1 euro, and they would receive 1.2050 if they were to sell 1 euro.

It’s important to note that the bid-ask spread can have a significant impact on the cost of trading currency pair The bid-ask spread is often used as a benchmark for the cost of trading a currency pair and is often expressed as a percentage of the trade’s total value.

For example, if the bid-ask spread is 0.0005 on a $10,000 trade, the cost of the trade would be $5.00. This cost can add up quickly, especially for traders who frequently enter and exit trades.

Alternatives to the Bid-Ask Spread

While the bid-ask spread is the most common convention used in the Forex market, there are alternatives that can be used. One alternative is the “mid-price,” also known as the “mid-market rate.” The mid-price is the average of the bid and ask price and is often used as a benchmark for the true value of a currency pair.

For example, using the same EUR/USD currency pair from the previous example, the mid-price would be (1.2050 + 1.2055) / 2 = 1.2052.

Another alternative is the “single price,” also known as the “direct rate.” The single price is the price at which a trader can simultaneously buy and sell a currency pair. The single price is often used by electronic trading platforms that offer instant execution of trades.

For example, using the same EUR/USD currency pair from the previous example, a single price of 1.2052 can be offered, where the trader can simultaneously buy and sell at the same rate.

Most actively traded currency pairs

The foreign exchange market, also known as the Forex market, is the largest financial market in the world. The market is driven by the trading of currency pairs, and among the most actively traded currency pairs are the EUR/USD, USD/JPY, GBP/USD, and USD/CHF.

EUR/USD

The EUR/USD currency pair is the most traded currency pair globally, and it reflects the economic conditions of the European Union and the United States. The pair is often referred to as the “Fiber” and it is considered as a barometer of the global economy.

The EUR/USD pair is sensitive to interest rate differentials and economic indicators such as GDP, inflation, and employment data. The European Central Bank (ECB) and the Federal Reserve (Fed) are the central banks that set monetary policy for the Euro and the US Dollar, respectively. The actions of these central banks can have a significant impact on the EUR/USD exchange rate.

The pair is known for it’s volatility and has wide bid-ask spread. The average daily range for the EUR/USD currency pair is around 90-120 pips which is considered high compared to other currency pairs.

USD/JPY

The USD/JPY currency pair is heavily influenced by the economic conditions of Japan and the United States. The pair is often referred to as the “Gopher” and it is closely followed by traders looking for safe-haven assets. The Bank of Japan (BOJ) and the Federal Reserve (Fed) are the central banks that set monetary policy for the Japanese Yen and the US Dollar, respectively.

The USD/JPY pair is sensitive to interest rate differentials, economic indicators, and geopolitical events. The pair has high liquidity and low volatility which makes it more suitable for traders who prefer lower risk trades.

The average daily range for USD/JPY currency pair is around 40-60 pips which is considered relatively low compared to other currency pairs.

GBP/USD

The GBP/USD currency pair reflects the economic conditions of the United Kingdom and the United States. The pair is often referred to as the “Cable” and it is sensitive to interest rate differentials, economic indicators, and geopolitical events. The Bank of England (BOE) and the Federal Reserve (Fed) are the central banks that set monetary policy for the British Pound and the US Dollar, respectively.

The GBP/USD pair can be more volatile compared to other currency pairs, especially during times of economic uncertainty or political turmoil. The pair is considered a high-risk, high-reward currency pair, and it can be an excellent opportunity for traders looking for high volatility.

The average daily range for GBP/USD currency pair is around 70-100 pips which is considered high compared to other Pairs of currencies traded on the foreign exchange market.

USD/CHF

The USD/CHF currency pair is known for its correlation with the EUR/USD pair, which makes it a popular choice for currency traders looking to diversify their portfolio. The pair is often referred to as the “Swissie” and it is heavily influenced by the economic conditions of Switzerland and the United States. The Swiss National Bank (SNB) and the Federal Reserve (Fed) are the central banks that set monetary policy for the Swiss Franc and the US Dollar, respectively.

The USD/CHF pair is sensitive to interest rate differentials, economic indicators, and geopolitical events. The pair is considered to be less volatile compared to other currency pairs and it can be a more suitable choice for traders who prefer lower risk trades.

What are Major Currency Pairs?

Major pairs are the most actively traded currency pairs on the forex market. Examples of major pair include the US Dollar and the Euro (EUR/USD), the US Dollar and the Japanese Yen (USD/JPY), the Euro and the British Pound (EUR/GBP) and the US Dollar and the Swiss Franc (USD/CHF). These currency pairs are highly liquid and are traded by a wide variety of investors, making them highly liquid and accessible. Major currency pairs typically have low spreads and are less volatile than other types.

What are Minor Currency Pairs?

Minor currency pairs are less actively traded than major currency pairs, but they still offer attractive trading opportunities. Examples are the Euro and the Australian Dollar (EUR/AUD), the US Dollar and the Canadian Dollar (USD/CAD), the Euro and the New Zealand Dollar (EUR/NZD) and the British Pound and the Japanese Yen (GBP/JPY). Minor currency pairs tend to have higher spreads than major currency pairs and can be more volatile in some cases.

Exotic Currency Pairs

Exotic currency pairs are made up of two currencies from different countries and are less liquid than major and minor currency pairs. Examples include the British Pound and the Mexican Peso (GBP/MXN), the US Dollar and the Singapore Dollar (USD/SGD), the Euro and the South African Rand (EUR/ZAR) and the US Dollar and the Turkish Lira (USD/TRY). Exotic currency pairs tend to have wider spreads and can be more volatile than major or minor currency pairs.

What is Cross Currency Pairs?

Cross currency pairs are made up of two currencies from different countries and are not directly related to the US dollar. Examples of cross currency pairs include the Euro and the British Pound (EUR/GBP), the Swiss Franc and the Japanese Yen (CHF/JPY), the British Pound and the Japanese Yen (GBP/JPY) and the Australian Dollar and the Japanese Yen (AUD/JPY). Cross currency pairs can be more volatile than major or minor currency pairs and tend to have wider spreads.

What are the Correlations Between Currency Pairs?

Correlation between currency pairs is an important concept to understand when trading forex. Currency pairs are typically categorized as positively correlated, negatively correlated or uncorrelated. Positively correlated currency pairs move in the same direction, while negatively correlated currency pairs move in the opposite direction.

Uncorrelated currency pairs move independently of each other. Examples of positively correlated currency pairs include the Euro and the US Dollar (EUR/USD) and the US Dollar and the Japanese Yen (USD/JPY). Examples of negatively correlated include the Euro and the Japanese Yen (EUR/JPY) and the US Dollar and the British Pound (USD/GBP).

What Currency Pair in Volatile markets?

Volatility is an important factor to consider when trading forex Volatility is a measure of the price movement of a currency pair over a given period of time. Currency pairs with higher volatility tend to be more unpredictable and can offer higher returns, while currency pairs with lower volatility tend to be less unpredictable and can offer lower returns. Examples of volatile currency pairs include the US Dollar and the Swiss Franc (USD/CHF) and the Euro and the British Pound (EUR/GBP).

Impact of Currency Pairs on Trading Strategies

When using traded currency pairs, traders should be aware of the different strategies that can be employed in order to maximize profits and minimize losses. One common strategy is to diversify trading activities by trading different type of money.

For example, if the US Dollar is weakening against other major currencies, traders may diversify by trading the Euro and the British Pound (EUR/GBP) or the Canadian Dollar and the Japanese Yen (CAD/JPY). Other strategies include trend following, which involves trading with the trend rather than against it, and scalping, which involves taking advantage of small price movements in a short period of time.

Fx Pairs and Risk Management

Risk management is a critical component of trading currency pairs and involves assessing and managing the risks associated with trading. Risk management strategies include setting stop-loss orders to protect against large losses, setting take-profit orders to maximize profits, and diversifying by trading different currency pairs. Additionally, traders should be aware of the correlation between Pairs of currencies traded in the Forex market, as highly correlated pairs may be more susceptible to large market movements.

Currency Pairs and Psychology

Trading psychology is an important factor to consider when trading Pair of currencies Traders should be aware of their own biases and how they can affect their decision-making process. For example, traders who are overly risk-averse may be less likely to take on new opportunities, while traders who are overly confident may be more likely to take on excessive risk. Additionally, traders should be aware of how their own emotions

What is the Difference Between Major, Minor, and Exotic Currency Pairs?

Major Pair of currencies are the most liquid and widely traded pairs, such as the US Dollar and Euro (EUR/USD), the British Pound and US Dollar (GBP/USD), and the Japanese Yen and US Dollar (USD/JPY). Minor currency pairs involve less liquid currencies, such as the Euro and Canadian Dollar (EUR/CAD) and the Australian Dollar and US Dollar (AUD/USD). Exotic currency pairs are those that involve more exotic currencies, such as the Mexican Peso and US Dollar (MXN/USD) and the South African Rand and US Dollar (ZAR/USD).

What is the Best Currency Pair to Trade?

The best currency pair to trade depends on the trader’s specific goals and risk appetite. Major currency pairs usually have lower spreads and more liquidity, making them ideal for traders looking for a low-risk option. Minor and exotic currency pairs can offer more volatility and higher returns, but they also come with higher risks.

What are the Most Volatile Currency Pairs?

The most volatile currency pairs are usually those involving exotic currencies, such as the Mexican Peso and US Dollar (MXN/USD) and the South African Rand and US Dollar (ZAR/USD). These pairs tend to have higher spreads and less liquidity, meaning they can be more volatile and offer higher returns, but also come with a greater risk.

How Do I Calculate the Value of a Currency Pair?

The value of a trading currency pair can be calculated by taking the price of one currency and dividing it by the price of the other. For example, if EUR/USD is trading at 1.1200, then the value of one Euro is 1.1200 US Dollars.

What Currencies are More Predictable Than Others?

Certain currency pair are more predictable than others due to factors such as central bank policy, economic data releases and geopolitical events. Major currency tend to be more predictable than minor and exotic pairs due to their higher liquidity and narrower spreads.

What are the Risks of Trading Forex Pairs?

Trading currency pairs involves risk, as the exchange rate can move in unpredictable directions. Additionally, Foreign exchange pairs may be subject to market, political, economic and other risks. Traders should be aware of the potential risks and ensure they have appropriate risk management strategies in place.

What are the Advantages of Trading Currency?

Trading Forex pairs can offer a number of advantages, such as access to global markets, diversification, and the potential for higher returns. Currency offer traders the ability to take advantage of market movements in different countries and time zones, providing them with more opportunities to maximize profits.

How Can I Use Forex Pairs to Diversify My Portfolio?

Fx pairs can be used to diversify a portfolio and reduce risk. Currency pairs offer traders the opportunity to gain exposure to different markets and currencies, allowing them to spread their risk across multiple assets. Additionally, currency pairs can be used to hedge against currency fluctuations, helping to protect traders from volatility in the foreign exchange market.

What is the Relationship Between Leverage and Currency Pairs?

Leverage is the use of borrowed funds to increase the potential returns of an investment. When trading different pairs, traders can use leverage to increase the size of their positions and increase the potential returns of their trades. However, leverage also increases risk, and traders should be aware of the potential risks associated with high leverage trading.

What Technical Indicators Can Be Used to Analyze Different Pairs?

Technical indicators can be used to analyze Pairs of currencies traded in the Forex market and identify potential trading opportunities. Popular indicators include moving averages, RSI, MACD, Bollinger Bands, and Stochastics. These indicators provide traders with insight into price movements, allowing them to make informed trading decisions.

What Are the Different Types of Trading Currency Pairs?

Currencies can be classified into three main categories: major, minor, and exotic. Major currency involve two widely traded currencies, such as the US Dollar and Euro (EUR/USD) and the British Pound and US Dollar (GBP/USD). Minor currency pairs involve less liquid currencies, such as the Euro and Canadian Dollar (EUR/CAD) and the Australian Dollar and US Dollar (AUD/USD)

Conclusion

In conclusion, Pairs of currencies traded on the foreign exchange market are a powerful tool for traders to gain exposure to the global financial markets. They can be used to speculate on the relative strength of different currencies, manage risk, and even influence trading psychology. As such, understanding how to trade currency pairs is an essential skill for any trader, and one that can help them maximize their profits and minimize their losses.