Currency Pairs
Some currency pairs are traded more often than others in the Forex market. How do Forex pairs work, what are they, and why do traders bet on them? Read below.

There are three types of currency pairs:

  • Major;
  • Cross/Minor;
  • Exotic.
If we are discussing the Majors, we have to mention that:

  1. They are the most popular currency pairs on Forex.
  2. All major pairs contain the USD.
  3. They make up ~80% of trade volume on the market.
There are seven major pairs: EUR/USD, GBP/USD, USD/JPY, USD/CHF, USD/CAD, AUD/USD, and NZD/USD.
There are seven major pairs: EUR/USD, GBP/USD, USD/JPY, USD/CHF, USD/CAD, AUD/USD, and NZD/USD.
Major pairs correlate with the global strongest economies, and they are traded in high volumes. As a rule, higher volumes imply smaller spreads.

All that means that the Majors are less affected by manipulation and, as a result, are more liquid.

Traders associate the Majors with immense volumes. They tend to have the lowest spread since they are the most traded currency pairs in the Forex market. You can find enough analysis on them.

What is the most traded currency pair in Forex? It is the EUR/USD with nearly 24% of all the Forex turnover.

It is because the Euro and the US Dollar represent the two largest economies in the world.
Crosses are currency pairs that do not include the US dollar.

Also, you can call them minor pairs or Minors.

Historically, cross pairs were converted first into USD and only then into the desired currency. These days, traders can exchange the Minors directly.

The name 'Crosses' derives from the fact that these pairs are a combination (or cross) of two major pairs.

The most traded Crosses are three major non-USD currencies: EUR, JPY, and GBP.

As a rule, the Crosses are more volatile than the Majors. Volatility means that the currency value can change sharply and often.

Although cross pairs are not so popular as the Majors, they still provide many trading opportunities.

The Crosses are not attached to USD. The concentration of most markets on pro-USD or anti-USD sentiments opens additional profit possibilities due to different price movements of the cross-pairs.

The exotic currency pairs (or Exotics) are rare in trading. Moreover, traders do not mention them often.

There is an exotic pair formula: the Major + currency from emerging or smaller economies.
It is crucial to understand that if a currency is called exotic, it does not mean it is poorly valued. It has more to do with its popularity among traders, not how developed a nation is.

Kuwaiti Dinar (KWD) and Saudi Arabian Riyal (SAR) confirm this statement. Both of them are high-value currencies. However, they are on the list of exotics.

Both CNH and CNY refer to the Chinese Yuan Renminbi. Since the China Forex market is controlled and not fully opened yet, China created an offshore version of its currency. So, while the yuan is called CNH in the offshore market, the mainland China market still refers to it as CNY.

Not all of the existing currency pairs are traded in the Forex market. Otherwise, 180 currencies recognized by the United Nations had to be paired up.

There are two main things you have to know before trading exotic pairs: they are more volatile and less liquid than the majors.

The more volatile the market is, the more frequent price movements are.

High volatility can provide higher profits, but it surely will make higher risks.

Low liquidity happens because of a lack of market participants who would take the other side of your order. For the same reason of low liquidity, exotic currency pairs are usually way more sensitive to economic and geopolitical events. It is essential to remember to avoid politics impacting your trading.

To ensure greater liquidity, go with the most popular exotic pairs.

Note: low liquidity makes exotic pairs more expensive to trade because they have wider bid-ask spreads.

For the details, take the interactive Forex tutorials and lessons built-in Forex Tester.

So, if you want to trade exotics more safely and not to lose money because of election results or something else, consider this in your decision, my friend.
What are the best forex pairs to trade is the knowledge that comes with experience. Understanding of which pairs to trade becomes more apparent in the trading process.
To ease this process and make it loss-safe, we recommend using special software simulating the market environment and using live historical data. Forex Tester is this kind of program. Develop your trading skills without losing any money, and then apply years' worth of experience in the real market.
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