The US Dollar is the most frequently traded currency in the world. As a result, most currencies are quoted against it. However, different types of currency pairs are used when referring to Forex trading, each of which is split into groups depending on the amount of trading activity and liquidity. These are known as majors, minors (or crosses), and exotic pairs.
The most traded currency pairs in the world are called the majors. They are generally the most liquid and attractive to all types of Forex traders. The EURUSD is the most traded pair, representing nearly 30% of all daily Forex trades on the entire Forex market.
Currencies not classed as major currencies but are normally traded against a major currency are called minor currencies and crosses
Currency pairs that do not contain the US Dollar are known as ‘crosses’. A currency pair involving a major non-US Dollar currency would also be known as a ‘minor currency pair’.
The most common crosses are pairs derived from the three major non-US Dollar currencies – Euro, Great British Pound, and Japanese Yen. For example, pairs that involve the euro are called ‘euro crosses’. Below is a list of Euro, Pound, Yen, and other crosses.
EURGBP--Euro/British Pound
EURCHF--Euro/Swiss Franc
EURAUD--Euro/Australian Dollar
EURCAD--Euro/Canadian Dollar
GBPAUD--British Pound/Australian Dollar
GBPCAD--British Pound/Canadian Dollar
GBPCHF--British Pound/Swiss Franc
GBPNZD--British Pound/New Zealand Dollar
GBPJPY--British Pound/Japanese Yen
EURJPY--Euro/Japanese Yen
CHFJPY--Swiss Franc/Japanese Yen
CADJPY--Canadian Dollar/Japanese Yen
AUDJPY--Australian Dollar/Japanese Yen
NZDJPY--New Zealand Dollar/Japanese Yen
AUDCAD--Australian Dollar/Canadian Dollar
AUDNZD--Australian Dollar/New Zealand Dollar
AUDCHF--Australian Dollar/Swiss Franc
CADCHF--Canadian Dollar/Swiss Franc
NZDCAD--New Zealand Dollar/Canadian Dollar
NZDCHF--New Zealand Dollar/Swiss Franc
Trading exotic pairs offer exposure to a wide range of developing and emerging market economies across Asia, the Middle East, and Africa. In general, exotic pairs are not traded as often as majors or crosses, which means they are not very liquid markets and lack consistent market activity.
There are often pros and cons associated with trading exotic currency pairs. Because they are not so widely traded, they can often be subject to higher trading fees; however, when the market moves, they can be subject to wild price fluctuations (suitable for the more experienced trader).
In Forex, many currency pairs (especially the majors) have particular nicknames which are commonly used in the market. Many even have an exciting story about why they were nicknamed that in the first place. For example, the FX pair GBPUSD is called ‘cable’.
This dates back to the 19th century when a communications cable ran across the Atlantic Ocean floor to get the exchange rate between the US Dollar and the British Pound.
In some cases, the currency by itself is known by a different name. For example, the US Dollar is often referred to as the ‘greenback’, while you may hear the British Pound referred to as ‘sterling’.
Below is a list of the most popular currency pair nicknames.
Currencies are often abbreviated to a three-letter currency code. The first two letters symbolize the country’s name, while the third is the country’s currency.
Let’s look at a few examples.
GBP – ‘GB’ stands for Great Britain, while the ‘P’ stands for Pound
USD – ‘US’ stands for the United States, the ‘D’ stands for Dollar
JPY – ‘JP’ stands for Japan, the ‘Y’ stands for Yen
In trading, you will hear a lot about ‘pips’ and ‘spreads’. Learn about pips in Forex and how different factors can influence spreads.
