Major Pairs: Definition in Forex Trading and How to Trade

The reason for this is that there isn’t enough liquidity in these minor pairs and it would be difficult to find someone willing to take the opposite side of your trade. These are not major currency pairs even though there’s a USD because you can see that the dollar is pegged into countries which are classified as developing nations. The currency pairs that do not involve USD[9] are called cross currency pairs, such as GBP/JPY.

You must therefore be vigilant when you trading major currency pairs. It’s worth noting that the LiteFinance online platform offers various options such as high liquidity majors consisting of EUR/USD, USDJPY, AUDUSD and others. They also offer crosses such exotic currency pairs such as GBP/JPY, EUR/GBP and exotic pairs such as USD/TRY, USD/MXN. Minor currency pairs refer to pairs that have less daily trading volume than the major forex pair but include at least one of the world’s major currencies.

USD/KRW

Commodity currencies are unique in Forex trading because their prices are closely tied to global commodity prices. This happens when a country is heavily dependent on the export of certain commodities, making its currency more sensitive to any price changes in the commodity markets. When you make a trade, you are simultaneously buying one currency and selling another. You buy the currency that is the first in the pair, it is also the base currency, and you sell the one that is the second in the pair – this is the quote currency.

Imagine each currency pair constantly in a “tug of war” with each currency on its own side of the rope. During the commodity slump of 2015, AUD reached a low point not seen since the 1970s. If you’re interested in holding AUD, you should expect to keep a close eye on the price of these commodities crucial to the Australian economy. This article represents the opinion of the Companies operating under the FXOpen brand only.

Trading USD/CHF

GBP/EUR has been especially volatile ever since the UK voted to leave the European Union (EU) on June 23, 2016. Traders should keep an eye on the US-China trade war as any developments are likely to affect the price of this currency pair. Since oil is priced in US dollars on the world markets, Canada can earn a large supply of US dollars through its oil exports. As such, if the price of oil rises, it is likely that the value of the Canadian dollar will strengthen compared to the US dollar. A slump in the value of these commodities on the world market would likely cause a reciprocal slump in the value of the Australian dollar.

The forex market is the most popular financial market, traded by individual retail traders, banks and businesses alike. When trading currencies, you’re selling one currency to buy another. Conversely, when trading commodities or stocks, you’re using cash to buy a unit of that commodity or a number of shares of a particular stock. Economic https://forexbox.info/ data relating to currency pairs, such as interest rates and economic growth or gross domestic product (GDP), affect the prices of a trading pair. So, the British pound, the Japanese yen, the Swiss franc, the Australian, and the Canadian dollars will make up the most actively traded currency pairs together with the US dollar and the Euro.

The Most Traded Currency Pairs in Forex (2023 Edition)

A pair is depicted only one way and never reversed for the purpose of a trade, but a buy or sell function is used at initiation of a trade. Buy a pair if bullish on the first position as compared to the second of the pair; conversely, sell if bearish on the first as compared to the second. Luckily with the majors, such movements are less frequent – although political events like Brexit can still affect the price of sterling and euro currency pairs. There are a number of factors which affect the price movements of every forex pair. These include interest rates, geopolitical instability, the strength of their country’s economy and the level of foreign direct investment (FDI) in the domestic market. As with all currency pairs, the role of each country’s central bank shouldn’t be underestimated.

At FXOpen, we care about the experience of our users, so if you feel you need more data, you can explore our blog to make informed decisions. To view online charts, you can go to the multi-asset trading platform TickTrader and enjoy advanced analytical tools. Choosing two pairs that are moving in different directions would be a better option to start with. Australia’s abundant mineral and agricultural exports influence its rate, while the economies of China and Japan also influence this pair. It’s important to note that a trend will continue until there is a signal to end it.

Different types of forex pairs

This is because forex trading is simultaneously buying one currency and selling another. The currency pair itself can be thought of as a single unit, an instrument that is either bought or sold. Examples are the euro and US dollar (EUR/USD), or the British pound and Japanese yen (GBP/JPY). The three main types of currency pairs are majors, minors (crosses) and exotics. The major currency pairs are often the most popular to trade, as they are the most liquid. Minor currency pairs are ones which leave out the United States dollar, and they are normally less liquid.

• For example, for a trader trading 1 lot of GBP/JPY, the cost per pip is $0.8392.
• Each currency pair has a base which is the first denoted currency, and a counter, which is the second denoted currency.
• Because the exotic currency pairs lack sufficient liquidity, at least compared to that of other pairs, the accuracy of technical analysis can suffer.

The price displayed for a currency pair represents the amount of the quote currency you will need to spend in order to purchase one unit of the base currency. Over the years the yen has been one of the more consistent safe haven currencies, which has made it my go-to currency when fear begins to grip global markets. The US dollar often enjoys the same “safety net” status, however, when matched up against a more formidable safe haven, the currency tends to move lower during times of economic unrest. These resources combined with the massive international trade and it’s little wonder why the New Zealand dollar is affected by global commodity prices.

The Three Commodity Pairs (What You Need to Know)

Regarding the FX market, there are four main CEE currencies to be aware of. So when paired with the U.S. dollar,  USD/SEK is read “dollar stockie”  and USD/NOK is read “dollar nockie”. This meant that these countries now had one currency, with the same monetary value, with the exception that each of these countries minted its own coins. For those of y’all who are really mesmerized by exotics, here’s a more comprehensive list. Liquidity is used to describe the level of activity in the financial market.

Examples include the euro and Swiss franc (EUR/CHF), Canadian dollar and Japanese yen (CAD/JPY), or pound sterling and Australian dollar (GBP/AUD). Cross pairs can provide trading opportunities when the majors are presenting less favourable conditions. Minor currency pairs are the second most traded in the forex market, and are sometimes referred to as https://forexhistory.info/ ‘crosses’. These currencies have less liquidity than major currency pairs and as a result, traders will often make more forex trades with minor currencies to reduce trading costs. The movement in major forex pairs is often more predictable within the FX market, due to the vast amount of knowledge and research that traders have collected over the years.

Cross Currency Pairs

This could be a reason for the increased activity that USD/KRW has experienced, as traders and speculators seek exposure to another key Asian market, besides those of Japan, China and Hong Kong. The yuan has largely been decreasing relative to the US dollar since the start of the US-China trade war. In turn, expensive https://bigbostrade.com/ oil means that the Canadian dollar will likely strengthen due to the close ties between the Canadian dollar and the price of oil. Much in the same way as the Fed and ECB, the Bank of Japan (BoJ) sets the interest rates for the Japanese economy which, in turn, affects the value of the yen relative to the US dollar.

• Currencies are traded in fixed contract sizes, specifically called lot sizes, or multiples thereof.
• Imagine a duo of global currencies, kind of like a dance partnership.
• Alright, so we’ve breezed through several terms and concepts when it comes to trading Forex currency pairs.

Moreover, their trading volume correlates with the size of the economy in corresponding countries. Exotic forex pairs can provide you with an opportunity to diversify your trading. Further, emerging market currencies offer a higher level of interest rate, which can make them attractive for carry trades. The popularity of EUR/USD as a currency pair means that it is highly liquid and that brokers often offer tight spreads. Equally, it tends to be less volatile than other currency pairs because the US dollar and the euro are backed by the world’s two largest economies. Due to the overall lower degree of liquidity, exotic currency pairs tend to be far more sensitive to economic and geopolitical events.

For example, a British bank may use GBP as a base currency for accounting, because all profits and losses are converted to sterling. If a EUR/USD position is closed out with a profit in USD by a British bank, then the rate-to-base will be expressed as a GBP/USD rate. This ambiguity leads many market participants to use the expressions currency 1 (CCY1) and currency 2 (CCY2), where one unit of CCY1 equals the quoted number of units of CCY2. FDI can affect the price of a currency pair because an increase in FDI is indicative of greater investor confidence in that country’s economy and infrastructure.