Understand Major Minor Exotic Currency Pairs in Forex

1. Understand Major, Minor, Exotic Currency Pairs in Forex In the Forex market, traders deal with two currencies simultaneously, exchanging one currency for another. In other words, let’s say you’re selling Euros and getting Dollars in return. In that case, you are trading the EUR/USD currency pair. If you know the price of the Euro in relation to the Dollar at that given time, you can use that knowledge to buy Euros and sell them for Dollars at a profit or loss. Understanding the differences between major, minor, and exotic currency pairs is essential for anyone looking to trade and invest in the Forex market. But what are currency pairs and how can we categorise them? A currency pair is the quotation of one currency against another. It is also known as a cross rate and can be written using either of two notations: 1.[Currency Symbol] / [Currency Symbol]. For example, EUR/USD or GBP/JPY. 2.[Currency Symbol] / [Symbol of Base Currency]. For example, USD/JPY or EUR/GBP Currency pairs are categorised into 3 main types: •Major Currency Pairs •Minor Currency Pairs •Exotic Currency Pairs

2. Major Currency Pairs All currency pairs are categorized according to the volume traded daily for a pair. The most widely traded currency pairs are known as major currency pairs. These pairs include major currencies like the USD, EUR, GBP, JPY, AUD, CAD and CHF. All major currency pairs involve the dollar as the base, or counter currency, in the trade. This category's most essential characteristics (or advantages) are the high liquidity and tight spreads, making them popular among traders. Examples of commonly used major currency pairs include: •EUR/USD - Euro vs US Dollar •GBP/USD - British Pound vs US Dollar Minor Currency Pairs Minor currency pairs, also known as cross pairs, are currencies that do not involve the U.S. dollar and occur when a major currency is traded with another major currency. In other words, they are derived from major currencies against each other. For example, EUR/GBP is derived from euro versus pound sterling (GBP). Some of the characteristics of minor currency pairs are lower liquidity and wider spreads compared to major pairs’ higher liquidity and tighter spreads. In addition, there can be significant price gaps between daily highs and lows for these less popular pairs due to low liquidity levels when most Asian traders are asleep or at work during European hours. Exotic Currency Pairs Exotic currency pairs have a developing economy's currency – as either the base or the counter currency – against a major currency. They are the less commonly traded pairs, often involving emerging or less liquid currencies. They can be traded on the same platform as major and minor pairs. Exotic pairs have unique characteristics that make them more volatile than their counterparts in other parts of the world. They may involve two currencies with a low trade volume or one illiquid compared to others in its region. This makes it difficult for traders who want to buy or sell large amounts of these currencies at once because there aren't enough buyers or sellers available at any given time, which can lead to wide spreads between bid prices (the price at which you can buy) and ask prices (the price someone else is willing to pay). Factors to Consider When Trading Different Pairs The most important factors to consider when choosing a currency pair to trade are: 1.Liquidity 2.Spreads, and 3.Volatility

3. Suppose there is high liquidity in a particular market. In that case, you'll be able to enter and exit positions quickly without moving prices too much--and this will lower your trading costs and reduce risk when you go long or short on any given pair. Spreads represent the difference between the bid/ask prices offered by different brokers at any given time. When choosing between multiple brokers offering similar services but different spreads on their products, look carefully at both sides before making up your mind! Volatility refers to how much risk exists within each market environment--and how likely those risks might affect other markets around them. For example, economic indicators like GDP growth rates generally affect all major currencies equally; however, geopolitical events such as Brexit may have a greater impact depending upon their location relative. Conclusion Conclusion We hope this article has helped you understand the different types of currency pairs, as well as the factors you should consider when trading in each one, and always remember that, as with any other type of investment, it's important to know what you're getting into before making any decisions about which currencies to trade or invest in, and always have a risk management strategy to secure your capital.