A currency pair shows you what one currency is worth when compared to another \u2013 like EUR\/USD or USD\/INR.<\/p>\n
When trading Forex, you will inevitably deal with a pair. Then there are the major, minor and exotic groups that you will probably stumble upon first.<\/p>\n
The US dollar paired with another heavily traded currency, like EUR\/USD.<\/p>\n
Two major currencies that do not include the US dollar, like GBP\/JPY.<\/p>\n
A major currency paired with the currency of a smaller or emerging economy, like USD\/INR.<\/p>\n
Majors are generally the most heavily traded and have lower costs. Exotics are generally less traded and have higher costs.<\/p>\n
So what’s a Forex currency pair all about? Essentially it is a simple statement of how much of one currency you need to buy the other one.<\/p>\n
It is just another way of saying “foreign exchange” markets, where countries exchange currencies with each other \u2013 that is the global market.<\/p>\n
Each pair has two parts:<\/p>\n
Take the pair EUR\/USD – here the Euro (EUR) is the base currency and the US dollar (USD) is the other one. Don’t worry too much about the jargon, just remember that it’s a comparison between two different currencies.<\/p>\n
So if you see EUR\/USD quoted as 1.0800, that means one Euro will get you 1.08 US dollars.<\/p>\n
If the price goes up to 1.0900, the Euro has suddenly become more valuable compared to the dollar.<\/p>\n
On the other hand if it slips down to 1.0700, the Euro is worth less. And that is the whole point of a price quote \u2013 it just compares two different currencies.<\/p>\n
Major currency pairs combine the US dollar with another heavily traded currency.<\/p>\n
They are the most commonly quoted pairs in the Forex market.<\/p>\n
The seven pairs usually listed as majors are:<\/p>\n
Majors generally have high liquidity<\/strong>.<\/p>\n Liquidity means how easily a currency can be bought or sold without big price jumps. They also usually have tighter spreads<\/strong>.<\/p>\n A spread is the small gap between the buying price and the selling price. It is one cost of trading.<\/p>\n Minor currency pairs, also called cross pairs, do not include the US dollar.<\/p>\n They are made of two major currencies, such as the euro, pound or yen.<\/p>\n Common examples include:<\/p>\n Minors are generally traded less than majors. Their liquidity is usually moderate, and their spreads are often a little wider than major pairs.<\/p>\n Exotic currency pairs are the ones made up of a major currency and that from a smaller, developing country.<\/p>\n They tend to be traded significantly less often than the big boys.Exotic currency pairs examples:<\/p>\n Exotics generally have lower liquidity and wider spreads. Their prices can also move more sharply at times.<\/p>\n This is why they are often described as having higher risk.<\/p>\n The main thing is the currencies that are used, that is what sets them apart.<\/p>\n This also affects how much trade there is in them and the spreads you are likely to get.<\/p>\n Spreads change with market conditions and with the broker or platform, so the table shows general patterns only.<\/p>\n Here is a quick way to spot the type of any pair:<\/p>\n It is a major pair.<\/p>\n Example: <\/strong>GBP\/USD.<\/p>\n It is a minor pair.<\/p>\n Example: <\/strong>EUR\/JPY.<\/p>\n It is an exotic pair.<\/p>\n Example:<\/strong> USD\/INR.Try it with USD\/CAD. The US dollar is paired with the Canadian dollar, a major currency. So it is a major pair.<\/p>\n Beginners need to get the hang of what base and quote currencies look like first, before getting too hung up on the specifics of each one.<\/p>\n Once that is clear, the major pairs make a great place to start getting more familiar.<\/p>\n That is because they crop up so much in Forex education and the news.<\/p>\n This is not a recommendation to trade any pair. Every pair carries risk.<\/p>\n The aim at this stage is only to understand the terms.A simple learning path:<\/p>\n Major, minor and exotic currency pairs are simply three ways of grouping Forex pairs.<\/p>\n Majors include the US dollar, minors are cross pairs without it, and exotics bring in smaller or emerging currencies.<\/p>\n Once you can read a pair and name its type, you have mastered one of the first building blocks of Forex terminology.<\/p>\nWhat are Minor Currency Pairs?<\/strong><\/h2>\n
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What are Exotic Currency Pairs?<\/strong><\/h2>\n
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Major vs Minor vs Exotic Currency Pairs: Key Differences<\/strong><\/h2>\n
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\n Currency Pair Type<\/strong><\/td>\n Does It Include USD?<\/strong><\/td>\n Examples<\/strong><\/td>\n Liquidity<\/strong><\/td>\n Spread<\/strong><\/td>\n Beginner-Friendly Explanation<\/strong><\/td>\n<\/tr>\n \n Major<\/td>\n Yes<\/td>\n EUR\/USD, USD\/JPY, GBP\/USD<\/td>\n High<\/td>\n Generally tight<\/td>\n The US dollar plus another heavily traded currency<\/td>\n<\/tr>\n \n Minor (cross)<\/td>\n No<\/td>\n EUR\/GBP, GBP\/JPY, AUD\/NZD<\/td>\n Moderate<\/td>\n Generally moderate<\/td>\n Two major currencies without the US dollar<\/td>\n<\/tr>\n \n Exotic<\/td>\n Usually yes, but not always<\/td>\n USD\/INR, USD\/TRY, USD\/ZAR<\/td>\n Lower<\/td>\n Generally wider<\/td>\n A major currency plus a smaller or emerging-market currency<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n Examples of Major, Minor and Exotic Currency Pairs<\/strong><\/h2>\n
Is the US dollar paired with another major currency?\u00a0<\/strong><\/h4>\n
Are both currencies major, with no US dollar?<\/strong><\/h4>\n
Is one currency from a smaller or emerging economy?<\/strong><\/h4>\n
Which Currency Pair Should Beginners Know First?<\/strong><\/h2>\n
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Conclusion<\/strong><\/h2>\n