Major pairs, Minor pairs, or Exotic pairs?

Not all currency pairs are built the same. Different currency pairs will come with their characteristics and depending on your trading preferences you can find a pair that suits your risk appetite. When you master the trading instruments you prefer you will not have to burden yourself with analyzing and tracking the number of pairs. You will be focused on a few pairs and paying close attention to the market. When you look for too many opportunities on multiple pairs, you will be tempted to overtrade your account by seeing too many opportunities to open positions. So today, we will look at the different types of trading pairs, discuss why they differ and help you conclude which one you should choose.

Some of these pairs which we will be discussing are known to be volatile. If you are up for that action that is fine, but you have to ensure that the broker you use offers low fixed spreads to maximize your returns. To find such a broker I recommend you use WikiFx. This app helps you find the best regulated and verified broker worldwide, so you can rest assured knowing your trading capital is in safe hands. They also show you which brokers are known to be scams so that you can avoid them before you lose your money. Make sure to start your search for a broker on WikiFX.

Major Pairs

The world is made up of different countries and within those countries, different economies perform differently. Depending on the economic performance of a country, the value of its currency will either rise or fall. The stronger the economy, the stronger the currency will be and the greater effect its change in value will have on the rest of the world. This is why we have the 8 Major pairs, they are made up of the strongest currencies from the strongest economies. These are the:

• The US dollar from the United States of America,

• The EUR from Europe

• The JPY Yen from Japan

• The CAD dollar from Canada

• The AUD from Australia

• The NZD from New Zealand

• The GBP pound for Great Britan

• The CHF swiss from Switzerland

The currency pairs they make are EUR/USD (Euro Dollar), GBP/USD (Pound Dollar), USD/CHF (Dollar Swissy), USD/JPY (Dollar Yen), AUD/USD (Aussie Dollar), NZD/USD (Kiwi Dollar), and the USD/CAD (Dollar Loonie). These currencies are the strongest in the world so they tend to be the most traded. Because of this, these trading pairs of these currencies offer the most liquidity. This large liquidity ensures that the spread on these pairs is pretty low so if you are looking to enter the markets at the lowest spreads Major pairs are your go-to. These pairs are the most volatile, so these pairs are preferred by fast pace traders.

Minor Pairs

Any pair that is made up of the top currencies but isn't held against the USD is considered a Minor pair. Because the American dollar is considered the base currency for the rest of the world and receives the most volume, the Major pairs that feature the USD are more commonly traded and hence these are minor currencies as they are less popular. The 7 minor pairs are EUR/GBP, EUR/JPY, GBP/JPY, GBP/CAD, CHF/JPY, EUR/AUD, and NZD/JPY. These pairs tend to move slower due to their decreased volume and their spread can vary but they are usually more than major pairs. These pairs tend to be less volatile meaning there are less of big up and down movements. If you are a long-term trader these pairs are likely to suit you as they may take time for the trade to move in pips but it is less likely to spike you out.

Exotic Pair

These are made up of the rest of the currencies of the rest of the world. These pairs tend to have huge spreads when compared to major and minor pairs because there is less interest in these currency pairs meaning there is less liquidity to trade them. These pair are for those who know the particularities of a countrys economy so well you can ensure success with your trades. This is useful for the country in which you live as you will be able to have a direct observation of your economy and currency and trade using that first-hand information.