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EP154A What are the differences between major, minor, and exotic pairs?
In forex trading, currency pairs are classified into three categories: major pairs, minor pairs, and exotic pairs. Understanding these differences is crucial because each type has distinct characteristics in terms of liquidity, volatility, and trading costs.
1. Major Currency Pairs
Definition:
Major pairs are the most traded currency pairs in the forex market. They always include the U.S. dollar (USD) on one side and are known for their high liquidity, tight spreads, and relatively lower volatility.
Examples:
- EUR/USD (Euro/US Dollar) – The most traded pair globally.
- USD/JPY (US Dollar/Japanese Yen) – Popular due to Japan’s economic influence.
- GBP/USD (British Pound/US Dollar) – Known as “Cable,” a highly liquid pair.
- USD/CHF (US Dollar/Swiss Franc) – Often used as a safe-haven trade.
- AUD/USD (Australian Dollar/US Dollar) – Influenced by commodity prices.
- USD/CAD (US Dollar/Canadian Dollar) – Tied to oil prices.
- NZD/USD (New Zealand Dollar/US Dollar) – Impacted by dairy and commodity exports.
Characteristics:
✔ High Liquidity – Easy to enter and exit trades.
✔ Tight Spreads – Lower transaction costs.
✔ Stable Price Movements – Less extreme volatility.
🔹 Example: A trader buying EUR/USD benefits from tight spreads, meaning they don’t lose much to broker fees when entering or exiting a trade.
Proven techniques and a tutor who has traded for over 30 years
Forexmentorpro.com, founded in 2008 is a low cost, high value training website catering for new, through to intermediate level forex traders. But more than this – and this is what really makes them different…their mentors explain in advance what they are intending to trade and why.
They are also adding live, weekly, interactive training sessions with Marc, fellow mentors and occasional guest presenters like trading psychology expert Rich Friesen (at no extra cost). All this is backed by a 30 day money back guarantee.
2. Minor Currency Pairs (Cross Pairs)
Definition:
Minor pairs (or cross pairs) do not include the U.S. dollar. They are still liquid but less so than major pairs. These pairs typically involve major global currencies like EUR, GBP, or JPY.
Examples:
- EUR/GBP (Euro/British Pound) – A popular European cross.
- EUR/AUD (Euro/Australian Dollar) – Affected by Eurozone and Australian economy.
- GBP/JPY (British Pound/Japanese Yen) – Known for high volatility.
- CHF/JPY (Swiss Franc/Japanese Yen) – Less traded but still significant.
Characteristics:
✔ Moderate Liquidity – Not as liquid as major pairs but still widely traded.
✔ Slightly Higher Spreads – Costs are higher than major pairs.
✔ More Volatility – Can offer greater trading opportunities.
🔹 Example: A trader trading GBP/JPY should be cautious, as it tends to have sharp price movements compared to EUR/USD.
3. Exotic Currency Pairs
Definition:
Exotic pairs consist of one major currency (like USD, EUR, or GBP) and a currency from an emerging or smaller economy. These pairs are much less liquid and have wider spreads.
Examples:
- USD/TRY (US Dollar/Turkish Lira) – Impacted by Turkey’s economy.
- EUR/ZAR (Euro/South African Rand) – Affected by political and commodity fluctuations.
- USD/THB (US Dollar/Thai Baht) – Tied to tourism and Thailand’s economy.
- GBP/MXN (British Pound/Mexican Peso) – Less commonly traded.
Characteristics:
✔ Low Liquidity – Fewer traders, making it harder to enter and exit positions.
✔ High Spreads – More expensive to trade due to low volume.
✔ Extreme Volatility – Prices can change rapidly due to political or economic instability.
🔹 Example: A trader trading USD/TRY might experience sudden spikes in price due to political events in Turkey.
Proven techniques and a tutor who has traded for over 30 years
Forexmentorpro.com, founded in 2008 is a low cost, high value training website catering for new, through to intermediate level forex traders. But more than this – and this is what really makes them different…their mentors explain in advance what they are intending to trade and why.
They are also adding live, weekly, interactive training sessions with Marc, fellow mentors and occasional guest presenters like trading psychology expert Rich Friesen (at no extra cost). All this is backed by a 30 day money back guarantee.
Conclusion
- Major pairs → High liquidity, low spreads, and stable movements (best for beginners).
- Minor pairs → Less liquidity, moderate spreads, and more volatility.
- Exotic pairs → Low liquidity, high spreads, and extreme volatility (best for experienced traders).
Choosing the right currency pairs depends on your trading style, risk tolerance, and market experience. Would you like help selecting the best pairs for your strategy? 🚀