What are the different types of currency pairs?
The currency pairs are the values of the currencies of countries. When a trader trades on a currency pair, he buys one country’s currency and takes a profit by selling it at another currency pair’s value. Currency pairs have different types. Some of them are major, while others are exotic.
Types of Currency Pairs
There are three main types of currency pairs. It means that currencies are divided into three groups according to their value. These are minor, major, and exotic pairs.
Important Currency Pairs
Major currency pairs are those that are traded most often. These major currency pairs include the US dollar. However, other profitable currencies can give a profit to the trader. The value of currencies depends on the economy of a specific country. The major currency pairs are considered the best choices to trade. Because major currencies involve minimum risks due to market uncertainty,
Some examples of major currency pairs are AUD/USD, USD/CAD, EUR/USD, and USD/CHF. Each currency represents the currency of each country. All of the major currencies are paired with the USD. That is why the USD currency is considered the strongest currency.
These major currency pairs are traded more than 70% of the Forex market. That is why entry-level traders use this currency pair.
Minor Currency Pairs
The minor currency pair is also called a cross-currency pair. These currency pairs do not involve USD currency for trade. This is why this currency pair is called a minor currency pair. Minor currency pairs offer low leverage and work on bigger spreads.
There are different examples of such currency pairs. These are CAD/JPY, EUR/CAD, AUD/CHF, EUR/NZD, GBP/AUD, NZD/JPY, EUR/GBP and many more. Forex brokers with zar accounts work on all type of currencies. If your trade involves EUR, then the currency pair will add more stability and offer high liquidity.
Exotic Currency Pairs
An exotic currency pair is considered the most unpredictable currency pair. The value of the currency depends on the economy of the country. These types of currency pairs offer low liquidity, high spreads, and high risk. If you don’t want to take a high risk, then stay away from this currency pair.
Here are some exotic currency pair examples:
It is important to choose good instruments in different currency pairs. Whether it is a major, minor, or exotic currency pair, Traders need to consider different factors while choosing a currency pair. Volatility, strategy, risk level, and spread are just a few examples.
It is important to choose a currency pair that you have learnt and practiced while learning forex so that you can conduct business comfortably.Some traders don’t work at night, so they should not pick a currency pair that is open at night.
The best currency pair is a major currency pair. Because low risk is associated with it, you can commit to that for an extended period of time before expanding your trade to include other instruments after you have mastered trading with that pair.