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Major, Minor and Exotic Currency Pairs Explained
What separates the three groups of forex pairs, and how each one behaves when you trade it.
What separates the three groups of forex pairs, and how each one behaves when you trade it.
Currencies are always traded in pairs: you buy one and sell the other at the same time. Traders group pairs into majors, minors and exotics based on which currencies are involved. Each group behaves differently, and knowing the differences helps you choose what to trade.
In EUR/USD, the euro is the base currency and the US dollar is the quote currency. A price of 1.0850 means one euro costs 1.0850 dollars. Buying EUR/USD means you expect the euro to rise against the dollar.
Majors are the most traded pairs and all include the US dollar:
Because so much volume flows through them, majors usually have the tightest spreads and deepest liquidity. They're a common starting point for new traders.
Minors pair two major currencies without the US dollar, for example EUR/GBP, EUR/JPY, GBP/JPY, AUD/JPY and EUR/AUD. They're still widely traded, but spreads are typically a little wider than on majors. Some, such as GBP/JPY, are known for large daily ranges.
Exotics pair a major currency with the currency of a smaller or emerging economy, such as USD/TRY, USD/ZAR, USD/MXN or EUR/PLN. They can move sharply on local politics or central bank decisions.
Exotics usually have:
If you're starting out, majors offer the lowest costs and the most information to study. Minors add variety and can trend strongly. Exotics suit experienced traders who understand the extra risk. Whatever you choose, size your positions with a consistent risk using the position size calculator, and check the pip value of crosses with the pip calculator.
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CFDs are leveraged products and you can lose your money. This article is for education only and is not investment advice.