Major pairs refer to currency pairs that are heavily traded in the Forex market. They are deliverable currencies and highly used for economic transactions.
In addition, these currencies are among the Group of Ten (G10) currency group, and they drive the Forex market. As you may be aware, one of the major currency used for trading in the international market is US dollars. Others are Euros, Great Britain Pounds, Japanese Yen and Swiss Franc.
The trading volumes of these currencies, when paired together, exceed those of minor pairs.
The major pairs in Forex are:
Why do traders choose to trade major pairs?
Major pairs are widely traded because they have smaller spreads. Traders can easily enter or exit a trade in these currency pairs.
Since these are highly traded, it also means that buying or selling large position sizes will not cause any significant price movement. In addition, there is a lesser chance of slippage, though this is not completely eliminated.
Also known as cross pairs, minor pairs refer to any currency pair in Forex that does not include the US Dollar. They are not as highly traded as major pairs, but they consist of other major currencies such as Euros, Great Britain Pounds, Japanese Yen, and Swiss Franc.
Some of these pairs represent the trade relationships between countries, and they provide significant liquidity. Below are the common minor pairs.
Trade with minor pairs
Although minor pairs lack liquidity and have a higher spread than major pairs, there are still some benefits to trading them.
First, you can have access to more Forex trading instruments to help you review high probability trading opportunities. Minor pairs can also display persistent long term trends, which can be useful when trading them.
Exotic pairs are currency pairs in Forex that include one major currency and an emerging-market economy currency. They are well known for their high price fluctuations and are capable of offering higher potential returns. However, they make up a smaller share in the market as they are not popularly traded by traders. Exotic pairs are also subject to more price volatility since they have to do with emerging market currencies.
How to trade exotic pairs
Trading exotic pairs is the same as with other currency pairs. However, they require due diligence and advanced trading skill. You need to have a wealth of market knowledge to analyse and predict the movement of the currencies against each other.
We’ve discussed what major, minor and exotic pairs are in this article, as well as how you can start trading them. Remember that Forex is all about currency exchange, so you can start considering these instruments in your trading plans and strategies.