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What is major/minor market structure in forex?

The forex market is a dynamic and complex market that is characterized by various market structures. One of the most fundamental concepts in forex trading is the major/minor market structure. The major/minor market structure is essentially a classification system that is used to group the currency pairs traded in the forex market based on their liquidity and trading volume.

A major currency pair is any currency pair that includes the US dollar as one of its components. The major currency pairs are the most traded in the forex market, and they include EUR/USD, USD/JPY, GBP/USD, USD/CHF, AUD/USD, and USD/CAD. These currency pairs are considered major because they are the most liquid and have the highest trading volumes in the forex market.

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On the other hand, a minor currency pair is any currency pair that does not include the US dollar as one of its components. The minor currency pairs are less traded in the forex market, and they include EUR/GBP, EUR/CHF, EUR/AUD, GBP/JPY, and AUD/NZD, among others. These currency pairs are considered minor because they have lower liquidity and lower trading volumes compared to the major currency pairs.

The major/minor market structure is an important concept in forex trading because it helps traders to identify the most liquid and actively traded currency pairs in the forex market. The major currency pairs are considered to be the most stable and reliable because they are influenced by the policies and actions of the world’s largest economies, such as the United States, the European Union, and Japan.

In contrast, the minor currency pairs are more volatile and unpredictable because they are influenced by the policies and actions of smaller economies. For example, the value of the AUD/NZD currency pair is influenced by the economic policies of Australia and New Zealand, which are smaller economies compared to the United States or the European Union.

Traders who are new to forex trading are often advised to start with the major currency pairs because they are easier to analyze and less volatile compared to the minor currency pairs. Moreover, the major currency pairs have lower trading costs and tighter spreads, which means that traders can trade them with lower transaction costs.

However, experienced traders may also trade the minor currency pairs because they offer higher profit potential due to their volatility. For example, the GBP/JPY currency pair is known for its high volatility, which means that traders can make significant profits if they correctly predict its movements.

In conclusion, the major/minor market structure is an important concept in forex trading that helps traders to identify the most liquid and actively traded currency pairs in the forex market. The major currency pairs are considered to be the most stable and reliable, while the minor currency pairs are more volatile and unpredictable. Traders who are new to forex trading are advised to start with the major currency pairs, while experienced traders may also trade the minor currency pairs for higher profit potential.

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