← Guides

Currency Pairs Guide

Forex trading involves simultaneously buying one currency and selling another — each trade is a currency pair. Pairs are categorised as major, minor, or exotic based on liquidity, trading volume, and the economies involved.

Major pairs all include the US dollar on one side and a currency from a developed economy on the other: EUR/USD, USD/JPY, GBP/USD, USD/CHF, USD/CAD, AUD/USD, and NZD/USD. These seven pairs account for the vast majority of daily forex volume and offer the tightest spreads and highest liquidity. EUR/USD alone represents roughly 25% of global turnover.

Minor pairs (also called cross pairs) do not include the US dollar. Examples include EUR/GBP, EUR/JPY, GBP/JPY, and CHF/JPY. Spreads are wider than majors, and liquidity varies significantly across different pairs. Exotic pairs involve one currency from a major economy paired with one from an emerging or smaller economy, such as USD/TRY, EUR/TRY, USD/ZAR, or USD/BRL. Exotics carry wide spreads, higher transaction costs, and greater political or economic risk.

Pair Naming and Quote Conventions

The first currency in a pair is the base currency; the second is the quote currency. The exchange rate tells you how many units of the quote currency are needed to buy one unit of the base. For example, EUR/USD at 1.1000 means one euro buys 1.10 US dollars. Most pairs quote to four decimal places, but JPY pairs quote to two decimal places, and some exotics may use three or four.

Which Pairs to Trade

Beginners typically start with majors because of tight spreads, deep liquidity, and abundant news flow. Experienced traders may add minors and a few liquid exotics for diversification. Day traders favour high-volatility pairs like GBP/JPY, while swing traders often prefer EUR/USD or USD/JPY. Carrying trade strategies work best with high-yield exotics such as USD/TRY or USD/MXN.

FAQs

How many currency pairs should I trade?

Most traders recommend focusing on 3–5 pairs to develop deep familiarity with their behaviour, news drivers, and technical patterns.

Why are exotic spreads so wide?

Exotic currencies have lower trading volume, less liquidity, and higher counterparty risk, which brokers pass on as wider bid–ask spreads.

Can I trade exotic pairs on most brokers?

Many retail brokers offer exotics, but spreads and swap rates are substantially higher. Some brokers restrict leverage on exotics due to higher volatility.

Related Guides

Forex Risk Management Guide — Protecting Your Trading CapitalLearn essential risk management for forex trading: position sizing, stop losses, risk-reward ratios, drawdown limits, and strategies to protect your capital.Forex Regulation GuideHow forex brokers are regulated globally, what to look for when choosing a broker, and how to verify regulatory status and investor protection schemes.Currency ETFs and ETNs GuideHow currency ETFs and ETNs provide forex exposure through exchange-traded products, including single-currency funds, baskets, and hedging strategies.Carry Trade Strategy: How to Profit From Interest Rate Differences in ForexLearn how the forex carry trade works — borrowing low-yielding currencies to buy high-yielding ones, earning the interest rate differential as daily profit.Best Times to Trade Forex: A Guide to Trading Sessions & Market HoursLearn the best times to trade forex based on market sessions — London, New York, Tokyo, Sydney. When volatility is highest, when spreads are tightest, and...Forex Fundamental Analysis GuideHow to analyse economic data, central bank policy, and geopolitical events to forecast currency movements and make informed forex trades.
Browse all guides →