The foreign exchange market, also known as forex, is the largest financial market in the world with an estimated daily turnover of $6.6 trillion. Forex trading involves the buying and selling of currencies from different countries with the aim of making a profit from the fluctuations in their exchange rates. In order to trade forex, traders need to have an understanding of the currency pairs available for trading.
A currency pair is a combination of two different currencies, where one currency is the base currency and the other is the quote currency. The base currency is the one that is being bought or sold, while the quote currency is the one used to pay for the transaction. There are a total of 180 different currencies in the world, but not all of them are actively traded in the forex market. Instead, only a select few currencies are traded on a regular basis, and they are usually paired with other major currencies.
The most commonly traded currency pairs in the forex market are known as the major currency pairs. These pairs include the US dollar (USD), the euro (EUR), the Japanese yen (JPY), the British pound sterling (GBP), the Swiss franc (CHF), the Canadian dollar (CAD), the Australian dollar (AUD), and the New Zealand dollar (NZD). These currencies are considered major because they are widely accepted and used in international trade, finance, and investment.
There are a total of 28 major currency pairs in the forex market, which are divided into three categories: the majors, the minors, and the exotics. The majors are the most liquid and widely traded currency pairs, and they include the EUR/USD, USD/JPY, GBP/USD, USD/CHF, AUD/USD, USD/CAD, and NZD/USD. These currency pairs are often referred to as the “big seven” and they account for the majority of the trading volume in the forex market.
The minors, also known as the cross currency pairs, are currency pairs that do not include the US dollar as either the base or the quote currency. Some of the most commonly traded minors include the EUR/GBP, EUR/JPY, GBP/JPY, and AUD/NZD. These currency pairs are less liquid than the majors, but they still offer traders plenty of trading opportunities.
The exotics are currency pairs that include one major currency and one currency from an emerging market country. These currency pairs are often less liquid and more volatile than the majors and minors, but they can offer higher potential returns for traders who are willing to take on more risk. Some of the most commonly traded exotics include the USD/MXN, USD/ZAR, and USD/TRY.
In addition to the major, minor, and exotic currency pairs, there are also currency pairs that are specific to certain regions or countries. For example, there are currency pairs that include the Russian ruble (RUB), the Chinese yuan (CNY), the South African rand (ZAR), and the Brazilian real (BRL). These currency pairs are often less liquid and more volatile than the major pairs, but they can offer unique trading opportunities for traders who are knowledgeable about the political and economic factors that affect these countries.
In conclusion, there are a total of 28 major currency pairs in the forex market, which are divided into three categories: the majors, the minors, and the exotics. These currency pairs include the US dollar, euro, Japanese yen, British pound sterling, Swiss franc, Canadian dollar, Australian dollar, and New Zealand dollar. Traders can also trade currency pairs that are specific to certain regions or countries, such as the Russian ruble, Chinese yuan, South African rand, and Brazilian real. Understanding the different currency pairs available for trading is essential for forex traders who want to make informed trading decisions and maximize their profits in the market.