There are three major currency pairs: EUR/USD, USD/JPY, and USD/CAD. All three are dominated by the U.S. dollar, which accounts for more than half of all forex trades. The US dollar is also the base currency in all three pairings, but it does not follow the same correlation with the other currencies. Other pairs include the GBP/USD, EUR/JPY, and USD/CHF. The British pound, Swiss franc, and euro all have positive correlations with the euro.
The high liquidity associated with the majors can be beneficial to traders. These currency pairs are often traded at tighter spreads than their lesser-liquid counterparts. In addition, higher liquidity translates to lower transaction expenses for traders. The resulting lower transaction costs mean more profitable trading in these currency pairs. As a result, they tend to be less volatile. Although highly liquid currencies are often more volatile, this is rarely the case. Traders who focus on a few of the major currency pairs may find that they have lower transaction expenses than other types.
Among the major currency pairs, EUR/USD is the most liquid. It is a combination of the British pound sterling and the U.S. dollar. Interest rates from the Bank of England and the US Federal Reserve affect the value of the currency pair. The currency pairs are often influenced by news events like non-farm payroll announcements and other major economic reports. This volatility makes trading in currency pairs like EUR/USD an ideal choice for beginners.
Spread is the difference between the bid and ask price of a currency pair. It is usually measured in pips and is most significant in trading major currency pairs. Exotic currency pairs have wider spreads than the majors. It is important to understand the spread before trading. The spread will determine how much you spend on the trade. In forex, the spread between EUR/USD/JPY will be higher for more popular pairs.
The EUR/USD currency pair consists of two currencies: the base currency and the quote currency. The EUR/USD quote indicates that one euro is worth 1.13 US dollars. In this situation, you would purchase EUR and sell the USD. You can sell one currency for the other and profit from the other. If you have a large portfolio, EUR/USD would be a good investment. It’s important to note that if the EUR/USD pair is weaker, you can sell it and buy it back up.
The value of currencies varies, and traders need to stay updated with the latest news and economic data to decide how to trade. The most volatile currency pairs are those of the ‘exotics’. While they’re more volatile, most people don’t trade them. Those with less experience should stick to the more liquid currency pairs and choose leverage based on your level of expertise. If you’re new to trading, be sure to learn the basics first, then you can move on to more exotic pairs as your skills develop.
Another important currency pair in the Forex market is the USD/CHF. Switzerland is a known safe haven for investors. The Swiss franc’s value is largely determined by the fluctuations in the euro. Meanwhile, the Canadian dollar is heavily impacted by oil prices, so you need to stay informed about the latest trends in this pair. You’ll be able to make money by analyzing these currency pairs to determine which ones work best for you.
The three major currency pairs are USD/JPY, EUR/GBP, and CHF. These are the most commonly traded pairs, accounting for about 12% of overall turnover in the Forex market. Besides USD/JPY, there are also some interesting currency pairs like the Brazilian real and Mexican peso. Usually, a currency pair’s liquidity is reflected in how many other traders are interested in it. Popular currency pairs usually have a high liquidity level and can be traded in large amounts, while exotic pairs often have little liquidity and are subject to volatile price swings.
The EUR/USD is the most volatile pair, and fluctuates constantly. Because of the volatility of the market, trading with this currency pair can yield large profits or tremendous losses. Day traders often take advantage of this volatility to profit from its fluctuations. So, if you are serious about becoming a Forex trader, make sure you understand how the price changes in each currency pair. You will be able to make more profitable trades when the pip value fluctuates less.