Most important things to know about currency pairs

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Everything you must know about currency pairs

 

Currency pairs

When it comes to currency pairs, not all currencies are worth trading- there are other currency pairs you might want to stay away from especially if you are new to currency trading.

Here, we look at 3 types of currency pairs.

currencies in the forex market are divided into 3 subparts- The major currency pairs, the crosses currency pairs, and the Exotic currency pairs.

1. Major pairs

First and most traded group is called “major pairs”. These are the currencies of the major countries paired against the US dollars.

By “major countries” i am talking about these currencies-

 Canada (Cad)

 Switzerland (Chf)

New Zealand (Nzd)

Australia (Aud)

Japan (Jpy)

Euro Zone (Euro)

All these currencies are paired with us dollar. They are the most frequently traded pairs. Because they are the most liquid and have the lowest spread as possible. While EUR/USD is the most traded pair in the Forex market.

Here are 7 major Currency Pairs

EUR/USD

GBP/USD

AUD/USD

NZD/USD

USD/CHF

USD/CHF

USD/JPY

USD/CAD

2. Cross-currency pairs

The second group is called cross-Currency or Minor Pairs

These are major currencies  but are not paired against the US Dollar.

Here are 17 Cross-Currency Pairs

AUD/CAD, AUD/CHF, AUD/JPY, AUD/NZD, CAD/JPY, CHF/JPY, EUR/AUD, EUR/CAD, EUR/CHF, EUR/GBP, EUR/JPY, EUR/NZD

GBP/AUD, GBP/CHF, GBP/JPY, NZD/JPY.

In general, GBP and JPY cross currency pairs are the most volatile currency pairs in this group so when you trade these pairs like GBP/JPY you might want to place a wider stop loss.

3. Exotic Currency Pairs

Last but not least is the Exotic pairs. These pairs are made up of a major currency paired with the currency of an emerging countries.

They are called exotic because of their pip value. Their pip value is much smaller than the other 2 groups, they are much more volatile and thus less reliable than the majors and crosses, due to the thin liquidity in the exotic pairs they can move very fast and make spikes very often, much more often than the majors or crosses.

This means there is more risk built into the exotics, and it also means they have wider spreads than the majors and the crosses.

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Here are some of the exotic pairs

USD/DKK, USD/HKD, USD/NOK, USD/SEK, USD/SGD, USD/TRY, USD/ZAR, EUR/DKK, EUR/NOK, EUR/SEK, EUR/TRY,EUR/ZAR…

Remember, These exotic  pairs are not traded as often as the Major and minor’ currencies, because the cost of trading these pairs is higher than the majors or minors Pairs . Try to avoid them.

So which  pairs you should focus on as a new trader?

 Major and Cross-currency pairs

If you’re a novice trader, these 29 currencies below should be enough for you.

EUR/USD, GBP/USD, NZD/USD, AUD/USD, XAU/USD

NOTE: XAU/USD is gold. i also include gold in this list since i trade it regularly.

USD/CHF, USD/JPY, USD/CAD,AUD/JPY, CAD/JPY, CHF/JPY, EUR/JPY, GBP/JPY, NZD/JPY, NZD/CHF

AUD/CAD, AUD/CHF, AUD/NZD, CAD/CHF,  GBP/AUD, GBP/CAD, GBP/CHF, GBP/NZD,

EUR/AUD, EUR/CAD, EUR/CHF, EUR/GBP, EUR/NZD, & NZD/CAD.

 

Currency correlation

Most of these pairs are correlated to each other . I don’t want to talk about correlation of pairs in this article because i have already written an article here about the correlation of pairs to explain what it is and how it can help you grow your trading account.

It’s very important that you also read this article.

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