As you may know, currency trading is done on Forex pairs. You either buy one currency for the other or sell one currency for the other.
For instance, is you by the EUR/USD, you buy Euros with US dollars. If you sell it, you sell Euros for US dollars.
Currency pairs are divided into two groups: major pairs and exotic pairs.
The major currency pairs are those that are traded the most. Between them, they make up more than 80% of the worldwide volume of the Forex market.
Being so liquid has a few benefits for us traders: the market is always moving so there will always be someone to buy you out of an open position if you want to cash it out.
The spreads that brokers take (which make up the commission these brokers take from you) is usually lower for the majors than it is for the exotics. The difference in spreads can be tremendous: hundreds of percents, so you pay less commission for trading majors.
The major currency pairs are the following:
- EUR/USD – Euro vs. the US dollar
- GBP/USD – The UK pounds vs. the US dollar
- USD/CHF – US dollar vs the Swiss Franc
- USD/JPY – US Dollar vs. the Japanese Yen
- USD/CAD – US dollar vs. Canadian dollar
- AUD/USD – Australian dollar Vs. US dollar
- NZD/USD – New Zealand Dollar vs. dollar
These are also the pairs for which the most analysis is done and which most Forex methods work on. The exotic tend to be much less predictable and may not be sporadic at times.
I’m not saying tha the exotic pairs should never be traded as there are opportunities there as well, but the majors are a better place to start, that’s for sure.
