What Makes Major, Minor, and Exotic Currency Pairs Different?
One of the first concepts every forex trader encounters is the idea of currency pairs. However, not all currency pairs behave the same way. Understanding the differences between Major and Minor Currency Pairs, as well as exotic pairs, helps traders better understand market liquidity, volatility, and the factors that influence exchange rates. Major currency pairs are the most actively traded in the global foreign exchange market. These pairs always include the US dollar alongside another widely traded currency, such as the euro, Japanese yen, British pound, Swiss franc, Canadian dollar, Australian dollar, or New Zealand dollar. Because they are traded in high volumes every day, major pairs generally offer greater liquidity and often experience tighter spreads. Minor currency pairs, sometimes referred to as cross-currency pairs, do not include the US dollar. Examples include EUR/GBP, EUR/JPY, and GBP/JPY. Although these currencies represent major global economies, they typically have low...