The Majors, The Minors and Exotic Currency Pairs in Forex Trading

The Forex trading market is one of the most exciting markets to trade-in. Aside from being the most liquid, it is also open 24 hours a day, 7 days a week. Traders who cannot dedicate all their time to trading can take advantage of the market with this flexibility. This article will tackle the different terms used in the market, how it works and how to handle the risks.

What is a currency pair?

People use foreign currencies every day – be it in companies, governments, banks, and individuals, they use currencies in transactions like purchasing stock from a supplier overseas, a bank that is hedging on the exchange rate risk, and even an individual who’s merely going out of the country for a holiday. These individuals and financial institutions are in need of foreign currencies to get their deals complete. Transactions are either made through an exchange, brokers, or other third-party individuals. This is how the Forex market is created and the prices you see on your monitor reflect the demands of that particular currency.

Normally, every country has its own currencies – US Dollars, Euro, Pound Sterling, Yen, Renminbi, and a lot more. These are the currencies that you usually see when you trade forex. Exchange rates may be floating or pegged. Floating means that the currency is free to change anytime while being pegged to another currency means that the value of its rate cannot change since it has a fixed rate. An example of this is how Saudi Riyal is pegged to USD at 3.75. Some of the largest currencies in the world like USD/JPY and EUR/USD are floating currencies.

It Always Comes in Pairs

In the Forex market, currency pairs always appear in pairs, with the one being bought and the other one to be sold. When dealing with the financial market, you always worry about currency pairs and not just with the single currency.

Knowing More About the Base Currency and the Quote Currency

The currency pair’s price is quoted through the use of the same convention – the first part of the pair is called the base currency while the second currency is called quote currency. There are three types of currency pairs in the Forex market – the majors, the minors, and the exotic currency pairs.

Actually, you can trade forex using any currency. However, the currency pair is limited according to what is being offered by your chosen Forex broker.

Also Read: Futures trading: Definition, history, trading techniques, Pros and Cons

Majors

There are six pairs belonging to the major currencies. People trade these widely, like 80% of the trades being complete in the market is the attribute to them.

EUR/USD – Euro/US dollar

USD/JPY – US dollar/Japanese yen

USD/CAD – US dollar/Canadian dollar

AUD/USD – Australian dollar/US dollar

GBP/USD – British pound/US dollar

USD/CHF – US dollar/Swiss Franc

Minors

Minors also referred to as crosses are currencies that do not contain the US dollar. Among them are

GBP/MXN – British pound/Mexican peso

SGD/JPY – Singapore dollar/Japanese yen

EUR/GBP – Euro/British pound

EUR/AUD – Euro/Australian dollar

GBP/CAD – British pound/Canadian dollar

GBP/JPY – British pound/Japanese yen

CHF/JPY – Swiss franc/Japanese yen

NZD/PY – New Zealand dollar/Japanese yen

Exotics

These currency pairs are the least trade and are from smaller economies.

CHF/HUF – Swiss franc/Hungarian forint

GBP/CZK – British pound/Czech koruna

NZD/SGD – New Zealand dollar/Singapore dollar

JPY/NOK – Japanese yen/Norweigian krone

Euro/TRY – Euro/Turkish Lira