A crash course in major, minor and exotic currency pairs

In the forex market, you deal with two currencies at a time. When you’re selling pound sterling, for example, you need to know what you’re selling it for. Let’s say you’re selling pounds and getting euros in return. In that case, you’re trading the GBP/EUR currency pair. In forex, you’ll be talking about currency pairs a lot.

There are three types of currency pairs: major, minor and exotic.

Major currency pairs

Major currency pairs consist of the most frequently traded currencies globally. Because they have massive liquidity, you’re able to trade them virtually always. Furthermore, you’ll find the lowest spreads – or brokerage costs – when trading these pairs.

Major currency pairs include:

Currency pairs
GBP/USD	British pound/US dollar
EUR/USD	Euro/US dollar
USD/JPY	US dollar/Japanese yen
USD/CHF	US dollar/Swiss franc
USD/CAD	US dollar/Canadian dollar
AUD/USD	Australian dollar/US dollar
NZD/USD	New Zealand dollar/US dollar

Notice that every major currency pair has the US dollar on one side. This is because the dollar is the world’s leading reserve currency, and it’s involved in about 88% of currency trades.

Minor currency pairs

When a currency pair doesn’t include the US dollar, it’s called a minor currency pair or a cross-currency pair.

Here are a few minor currency pairs:

• EUR/GBP – Euro/British pound
• EUR/AUD – Euro/Australian dollar
• GBP/JPY – British pound/Japanese yen
• CHF/JPY – Swiss franc/Japanese yen
• NZD/JPY – New Zealand dollar/Japanese yen
• GBP/CAD – British pound/Canadian dollar

The most widely traded minor pairs consist of the pound sterling, euro or yen.

Exotic currency pairs

An exotic currency pair includes a major currency and the currency of a developing economy, such as Brazil or South Africa. You won’t find exotic pairs as often as you’ll find major or minor pairs, which means the spreads can be higher when trading them.

Exotic currency pairs include:

Currency pairs
EUR/TRY	Euro/Turkish lira
GBP/ZAR	British pound/South African rand
JPY/NOK	Japanese yen/Norwegian krone
NZD/SGD	New Zealand dollar/Singapore dollar
USD/HKD	US dollar/Hong Kong dollar
AUD/MXN	Australian dollar/Mexican peso

Which pairs should I trade?

Picking the right currency pairs to trade depends on your experience as a forex trader. If you’re new to the game, it’s best to stick with the major and minor pairs – it’s easier to find trades and you’ll get lower spreads. Exotic pairs are more difficult to work with because they’re far less liquid and you’ll find higher spreads.

That said, it’s possible to make money with exotic pairs as long as you know what you’re doing. These pairs can be riskier, but they can pay off more significantly.

Bottom line

The more widely traded a currency is, the easier it will be to trade and the lower spreads you’ll find.

Frequently asked questions

• How do I start trading in forex?

  You can get started by signing up for a forex trading platform like one of the ones we’ve compared in our complete guide to forex trading.

• Do I need a lot of money to start trading in forex?

  You don’t need much money to start trading. Many online forex brokers, for example, have no minimum deposit. However, many experts recommend starting with at least a few thousand pounds. Even still, consider trading only if you’ve practiced with paper or simulated trading first.

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