Buying and Selling Currency Pairs
Forex trading is the simultaneous buying of one currency and selling of another currency. Currencies are traded through a broker or dealer in pairs. For example the euro and the U.S. dollar (EUR/USD) or the British pound and the Swiss franc (GBP/CHF). In forex market you buy and sell in currency pairs.
A) Major Currency Pairs
Major currency pairs are the currency pairs that contain the U.S. dollar (USD) on one side and are the most widely pairs traded and the most liquid. The major currency pairs consist (in no specific order) EUR/USD, USD/JPY, GBP/USD, AUD/USD, USD/CHF, NZD/USD and USD/CAD.
B) Cross-Currency Pairs or Minor Currency Pairs
The currency pairs that don’t contain U.S. dollar (USD) are known as cross-currency pairs or “crosses”. They are also called minor currency pairs or simply “minors”. Here are a few minor currency pairs (in no specific order): EUR/GBP, EUR/AUD, GBP/JPY, CHF/JPY, NZD/JPY, GBP/CAD etc. The most active ones contain EUR, JPY, and GBP.
C) Exotic Currency Pairs
Exotic currency pairs consist one major currency paired with the currency of an emerging or developing economy, such as Brazil, Mexico or Hungary. Examples include USD/BRL, USD/MXN or EUR/HUF. Exotic pairs are not so widely traded.
D) G10 Currencies
The G10 currencies are ten of the most heavily traded currencies in the world, which are also ten of the world’s most liquid currencies. The G10 currencies list is as follows:
United States dollar
New Zealand dollar