What Are Currency Pairs? Major, Minor, and Exotic Explained

For the forex trader, currency pairs are the very guts of each and every deal. From understanding what currency pairs are and how they are categorised to their differences, a beginner trader or seasoned trader needs to know the basics. Here, we will explore basic currency pairs and then guide you through major, minor or even exotic ones.

What Are Currency Pairs?

It is a quotation of two different currencies, one currency in the pair being quoted against the other. The first currency is said to be the base currency, whereas the second one is said to be the quote currency or counter currency. For instance, if we consider the currency pair EUR/USD, EUR would be known as base currency and USD as quote currency. This means one unit of base currency EUR is equal to a certain amount of quote currency USD.

To speculate on one currency as compared to another, a trader uses currency pairs. For example, if one were to believe that the euro would turn stronger relative to the US dollar, one would buy EUR/USD. On the contrary, if one expected the euro to be weaker relative to the dollar, one would sell EUR/USD.

For people venturing into forex trading, the trading platforms and best forex brokers are going to greatly influence trading experience. Reliable forex broker platforms will therefore offer the necessary tools and resources for analyzing and trading currency pair instruments.

Types of Currency Pairs

Currency pairs are usually classified as major, minor, and exotic pairs. Such categories differ in terms of characteristics, trading volume, and respective level of risk.

1. Major Currency Pairs

These pairs are considered major. They are, however, the most traded in the entire forex market. Major currency pairs always include the US dollar (USD) as a base or a quote currency alongside others, preferably of another major currency. Some examples include:

• EUR/USD (Euro/US)

• GBP/USD (British Pound/US-Dollars)

• USD/JPY (US Dollar/Japanese Yen)
• USD/CHF (US Dollar/Swiss Franc)
• Some Key Characteristics of Major Pairs:
• They have very high liquidity that makes it easy to buy or sell them without big price fluctuations caused by demand and supply.
• Low spreads than what is available in other pairs total trading related costs reduced.
• Financial News Widely covered thus more information available for analysis. 

An ideal Forex trading platform or fx trading platform will give access of high liquidity as mentioned above pairs at competitive spreads. 

2. Minor Currency Pairs

Minor currency pairs do not have any US dollar in them. Rather, they comprise pairs among the major currencies of the world: the euro (EUR), British pound (GBP), or Japanese yen (JPY). Examples include: 

• EUR/GBP (Euro/British Pound) 
• AUD/JPY (Australian Dollar/Japanese Yen) 
• GBP/CHF (British Pound/Swiss Franc) 

Key Characteristics of Minor Pairs: 

• Medium Liquidity, Lesser as Compared to Majors, but More than Exotics. 
• Slightly Wider Spreads Compared to Major Pairs. 
• This type is the best for a trader searching for opportunity outside the market dominated by the USD.

A trustable forex broker platform can help you efficiently trade these minor pairs by offering advanced analytics and tools.

3.Exotic Currency Pairings

Exotic currency pairs refer to those consisting of a base currency representing a major economy and a currency from an emerging or a smaller economy. Some examples include:

• US Dollar-Turkish Lira (USD/TRY)
• Euro-Swedish Krona (EUR/SEK)
• British Pound-South African Rand (GBP/ZAR)

Characteristics of Exotic Pairs:

• Lower liquidity leading to greater price swings and greater risk.
• Wider Spreads imply that these pairs are costly to trade.

These pairs are often found to vary significantly due to destabilizing outside forces, like politics or economics, in their respective emerging markets.

Partnering with the best broker for Forex trading can help one bypass the challenges associated with exotic pairs.

Choose an Appropriate Currency Pair to Trade

The factors below should be considered when choosing the currency pairs to trade: 

• Trading Goals: Do you want to find high liquidity and low spreads, or do you prefer to trade more risky and possibly more profitable pairs?
• Market Analysis: With all major pairs, there is such a large coverage of market events that it becomes easier to analyze.

• Risk Tolerance: These exotic pairs refer to highly volatile commodity pairs due to their geopolitical character. Majors, on the other hand, are relatively stable.

Thus, ensure that the chosen forex broker platform matches one's trading needs-be it a more trustable forex trading platform or best forex broker for one's strategy.

The greatest portion of understanding things to do with currency pairs and their classifications in learning how to trade forex is finding an appropriate approach towards the turning of major pairs into those minuscule pips in minor pairs with extravagant rewards in exotic pairs that would be able to divide a purely theoretical learning concerning the personality of a certain currency pair. However, these should be coupled with thorough research and risk management strategies to assure that one will only be improving his or her trading journey.

Compare the relative money among the best forex trading platform or trustable broker for trading: Understand that this plays a role in making your experience with Forex truly rewarding and ideal, and quiet perhaps, such tools and resources may be the ones you need to find success in that particular trading market.