Forex trading has become one of the most popular ways to invest and earn money. With a daily turnover of over $5 trillion, the forex market is the largest financial market in the world. Forex trading involves buying and selling currencies with the aim of making a profit from the fluctuations in their exchange rates. To trade forex, traders need to know the currencies they can trade, and this brings us to the question: how many forex currency pairs are there?
In forex trading, currency pairs are the most fundamental element. A currency pair is a combination of two currencies that make up the exchange rate. For instance, the EUR/USD currency pair means the euro is the base currency, while the US dollar is the quote currency. The exchange rate is the value of one currency against another.
There is a wide range of currency pairs in forex trading. However, not all currency pairs are equal. Some currency pairs are more popular than others, and some are more volatile. The most liquid currency pairs have the highest trading volumes and are the most popular among traders.
Major Currency Pairs
Major currency pairs are the most commonly traded pairs in the forex market. These currency pairs account for approximately 80% of the total trading volume in the forex market. The major pairs include:
1. EUR/USD (Euro/US Dollar) – This is the most popular and most traded currency pair globally. It accounts for almost 30% of the total trading volume in the forex market.
2. USD/JPY (US Dollar/Japanese Yen) – This is the second most traded currency pair. It accounts for almost 20% of the total trading volume in the forex market.
3. GBP/USD (British Pound/US Dollar) – Also known as the “cable,” this currency pair accounts for approximately 10% of the total trading volume in the forex market.
4. USD/CHF (US Dollar/Swiss Franc) – This currency pair accounts for approximately 5% of the total trading volume in the forex market.
5. AUD/USD (Australian Dollar/US Dollar) – This currency pair accounts for approximately 5% of the total trading volume in the forex market.
6. USD/CAD (US Dollar/Canadian Dollar) – This currency pair accounts for approximately 5% of the total trading volume in the forex market.
7. NZD/USD (New Zealand Dollar/US Dollar) – This currency pair accounts for approximately 2% of the total trading volume in the forex market.
Minor Currency Pairs
Minor currency pairs are also known as cross-currency pairs. These are currency pairs that do not involve the US dollar. Minor currency pairs are less liquid than major currency pairs, and they have wider bid-ask spreads. Some of the minor currency pairs include:
1. EUR/GBP (Euro/British Pound)
2. EUR/JPY (Euro/Japanese Yen)
3. GBP/JPY (British Pound/Japanese Yen)
4. EUR/CHF (Euro/Swiss Franc)
5. GBP/CHF (British Pound/Swiss Franc)
6. AUD/CAD (Australian Dollar/Canadian Dollar)
7. AUD/JPY (Australian Dollar/Japanese Yen)
Exotic Currency Pairs
Exotic currency pairs are currency pairs that involve one major currency and one currency from an emerging market. These currency pairs are less liquid than major and minor currency pairs, and they have wider bid-ask spreads. Some of the exotic currency pairs include:
1. USD/HKD (US Dollar/Hong Kong Dollar)
2. USD/ZAR (US Dollar/South African Rand)
3. USD/SGD (US Dollar/Singapore Dollar)
4. USD/TRY (US Dollar/Turkish Lira)
5. USD/MXN (US Dollar/Mexican Peso)
6. USD/THB (US Dollar/Thai Baht)
7. USD/IDR (US Dollar/Indonesian Rupiah)
Conclusion
In conclusion, there are a wide range of currency pairs available for forex trading. The most popular currency pairs are the major currency pairs, which account for approximately 80% of the total trading volume in the forex market. The minor currency pairs are less liquid than major currency pairs, and they have wider bid-ask spreads. Exotic currency pairs are even less liquid and have wider bid-ask spreads than minor currency pairs. Traders need to understand the characteristics of each currency pair to make informed trading decisions.
