Financial Analyst/ Guest author, RADEX MARKETS
Lee W. is a seasoned professional trader with over 10 years of experience. Passionate about sharing valuable expertise and unique market insights, Lee W. now serves as an external and independent market analyst for RADEX MARKETS.
PODÍL
The foreign exchange market is the largest and most liquid financial market in the world, with around $7.5 trillion traded every day, attracting everyone from central banks and multinational companies to hedge funds and individual retail traders.
One of the first things you discover when you start learning forex is that you never trade a currency on its own. Instead, you trade it against another currency. A currency pair is simply the value of one currency compared with another, and every trade you place in the forex market is based on that relationship.
It sounds straightforward enough, but I've found that this is where many beginners get stuck. They can recognise a chart showing EUR/USD or GBP/JPY, yet they aren't entirely sure what those letters actually represent or why the price moves up one day and down the next. If you don't understand currency pairs, you don't really understand how the forex market works.
Once the concept clicks, everything else starts to make more sense. Reading price quotes becomes easier, economic news suddenly has context, and you begin to understand why traders choose certain pairs over others. Whether you're placing your very first trade or simply filling in a few gaps in your knowledge, getting comfortable with currency pairs is one of the best investments you can make as a trader.
A currency pair is a quotation showing the value of one currency relative to another: the first is the base currency, the second is the quote currency, and the price tells you how much of the quote currency buys one unit of the base. Pairs fall into three groups — majors, minors and exotics — and majors such as EUR/USD offer the highest liquidity and lowest trading costs.
Ready to trade your first currency pair?
A currency pair is a quotation that shows the value of one currency relative to another. Every forex trade involves buying one currency while simultaneously selling another, so currencies are always traded in pairs rather than individually.
Every currency pair has two parts:
Think of it like comparing the prices of two products in a shop. You're not looking at the value of one item in isolation; you're comparing it against something else. Forex works in exactly the same way.
For example, if EUR/USD = 1.15, it means €1 is worth US$1.15. In other words, you would need 1.15 US dollars to buy one euro.
Once you understand that simple rule, reading forex prices becomes much less intimidating.
One thing I always tell new traders is that a currency pair never moves in isolation. A rising or falling price simply tells you how one currency is performing relative to the other.
Using EUR/USD as an example:
This is one of those concepts that feels confusing for about five minutes. Then it suddenly clicks, and you'll wonder why it seemed complicated in the first place.
Every currency pair shares a few important characteristics:
Once you understand how a currency pair is quoted and what its price represents, the rest of forex starts to become much easier to follow. It's the foundation that everything else is built on.
Read more: Long vs Short Position Compared: How to Trade Each Like a Pro
Currency pairs are normally divided into three categories based on how frequently they're traded, how much liquidity they attract and the types of currencies they contain. Understanding the differences matters because each group offers a different balance of trading costs, volatility and risk. As your experience grows, you'll probably trade all three at some point, but they certainly aren't created equal.
The three main types are:
Let's look at each one in more detail.
Major currency pairs are the most actively traded currencies in the forex market. What defines a major pair is simple: the US dollar (USD) always appears on one side of the trade, paired with the currency of another major economy. Because these pairs attract the highest trading volume, they generally offer the greatest liquidity, the tightest spreads and the fastest trade execution.
There are good reasons why the majors dominate the market. Millions of transactions take place every day between governments, multinational companies, investment banks and retail traders. That constant flow of buying and selling means there's usually someone willing to take the other side of your trade, resulting in smoother price movement and lower trading costs.
Another advantage is transparency. Major currency pairs are driven largely by well-publicised economic releases, central bank decisions and geopolitical developments. Whether it's an interest rate announcement from the Federal Reserve, inflation figures from the Eurozone or employment data from the United States, there's rarely a shortage of information to help explain why prices are moving.
The forex market recognises seven major currency pairs:
You may also notice that AUD, CAD and NZD are often referred to as commodity currencies. That's because the economies of Australia, Canada and New Zealand rely heavily on exporting commodities such as iron ore, crude oil, natural gas and dairy products. As commodity prices rise or fall, these currencies often react alongside them.
After years of trading, if someone asked me where to begin tomorrow, my answer wouldn't have changed much. I'd still suggest starting with one or two of the major pairs.
They're cheaper to trade, there's an endless supply of news and analysis to learn from, and their behaviour is generally easier to understand than thinner, more volatile markets. That doesn't mean they're easy, forex never is, but they usually offer fewer unpleasant surprises than some of the more exotic alternatives.
Major Pair |
Common Nickname |
|---|---|
| EUR/USD | The Euro (or Fiber) |
| USD/JPY | The Yen (or Ninja) |
| GBP/USD | The Cable |
| AUD/USD | The Aussie |
| USD/CHF | The Swisse |
| USD/CAD | The Loonie |
| NZD/USD | The Kiwi |
These nicknames are widely used by traders, analysts and financial media. Don't be surprised if you hear someone say they're "buying Cable" or "watching the Aussie", they're simply referring to the currency pair rather than using its full symbol.
Minor currency pairs, often called cross currency pairs, are forex pairs that do not include the US dollar. Instead, they combine two major currencies, allowing traders to focus on the relationship between those economies without the influence of the world's reserve currency.
There's one small point that often catches beginners out. You'll sometimes hear the terms "crosses" and "minors" used interchangeably. Strictly speaking, every pair without the US dollar is a cross, while the term minor pairs generally refers to the most actively traded crosses. In practice, though, most traders use both terms to describe the same group.
Some of the best-known minor pairs include:
These pairs tend to offer good liquidity, although not quite at the same level as the majors. As a result, you'll usually see spreads that are slightly wider and price movements that can be a little less predictable during quieter trading sessions.
Unlike major pairs, where the US dollar is involved in every trade, minor pairs are influenced by two separate regional economies. If you're trading EUR/GBP, for example, you'll want to pay attention to economic releases from both the Eurozone and the United Kingdom. Likewise, GBP/JPY can react sharply to news from either the UK or Japan, making it one of the more volatile crosses in the market.
One pair that's earned quite a reputation over the years is GBP/JPY. Traders often nickname it "the Dragon" because of its large daily price swings. Those bigger moves can create plenty of trading opportunities, but they also demand disciplined risk management. This pair is one of my favourite pairs to trade.
Minor pairs become particularly useful when you want to trade a regional theme rather than simply taking a view on the US dollar.
For example, if you believe the UK economy is likely to outperform the Eurozone, EUR/GBP allows you to trade that idea directly. You're comparing Europe against Britain, without US economic data muddying the picture.
It's a slightly more focused approach, and once you become comfortable following multiple economies, minor pairs can open up opportunities that major pairs simply don't offer.
Minor Pair |
Currencies |
Pros |
Cons |
|---|---|---|---|
| EUR/GBP | Euro / British Pound | Tight trading ranges and a clear Europe vs UK theme | Can spend long periods moving sideways |
| EUR/JPY | Euro / Japanese Yen | Good liquidity and often reflects global risk sentiment | Can react sharply during risk-off events |
| GBP/JPY | British Pound / Japanese Yen | Large intraday movements and strong trends | High volatility and wider spreads |
| EUR/AUD | Euro / Australian Dollar | Diversifies away from the US dollar | Influenced by commodity prices and global growth |
Personally, I think minor pairs are worth exploring once you've built some confidence with the majors. They introduce a few more moving parts, but they also teach you to think beyond the US dollar, which is an important step as you develop as a trader.
An exotic currency pair combines a major currency with the currency of an emerging market or a smaller economy. These pairs are the least traded in the forex market and are typically characterised by lower liquidity, wider spreads, higher volatility and greater sensitivity to political and economic events.
Because fewer traders and institutions actively buy and sell these currencies, prices can move much more aggressively than you're probably used to seeing on the major pairs. That can create opportunities, but it also introduces a level of risk that many beginners underestimate.
Some commonly traded exotic pairs include:
Although these pairs are available through many brokers, they don't attract anywhere near the same trading volume as EUR/USD or USD/JPY.
The main reason comes down to liquidity.
When fewer market participants are trading a currency pair, it becomes harder to match buyers with sellers. That often means orders take longer to fill, prices can jump between levels, and the difference between the bid and ask price (the spread) becomes much wider.
Political uncertainty can also have a much greater impact. Elections, changes in monetary policy, inflation shocks or geopolitical events can cause exotic currencies to move sharply within a short period. In some cases, prices can gap significantly, particularly after major news announcements or over weekends.
I've seen plenty of newer traders become attracted to exotic pairs because of the huge price swings. On paper, those movements look exciting. In reality, wider spreads and sudden gaps can quickly turn what looked like a good trade into an expensive lesson. If you decide to trade exotics, I'd always suggest reducing your position size and treating risk management as your first priority rather than an afterthought. I don't trade exotic pairs myself.
Now that we've looked at all three categories, it's much easier to see why traders choose different pairs depending on their experience and objectives.
Type |
Liquidity |
Typical Spread |
Example Pairs |
Pros |
Cons |
|---|---|---|---|---|---|
| Major | Highest | Tightest | EUR/USD, USD/JPY, GBP/USD | Lowest trading costs, excellent liquidity, reliable execution | Can be quieter outside active sessions |
| Minor (Cross) | Moderate | Wider than majors | EUR/GBP, EUR/JPY, GBP/JPY | Good diversification and regional trading opportunities | Wider spreads and lower liquidity |
| Exotic | Lowest | Widest | USD/TRY, USD/ZAR, USD/MXN | Large price movements and unique opportunities | High costs, greater volatility and increased gap risk |
The progression is fairly logical. As liquidity decreases, trading costs generally increase, and price movements become less predictable. That's one of the reasons most traders spend the majority of their time focusing on major pairs, only branching out into minors or exotics once they've gained more experience and developed a consistent trading approach.
A currency pair rises when the base currency strengthens against the quote currency, and it falls when the base currency weakens. Every movement you see on a forex chart reflects the changing relationship between two economies, not the value of one currency in isolation.
Take EUR/USD as an example. If traders become more confident in the Eurozone economy while sentiment towards the US dollar weakens, EUR/USD is likely to move higher. If the opposite happens, the pair will usually fall.
This is also where you'll hear traders talk about being bullish or bearish:
Once you start thinking in terms of relative strength rather than absolute value, price movements become much easier to understand.
No single factor controls the forex market. Instead, prices react to thousands of buying and selling decisions every second. However, most movements can usually be traced back to three major drivers.
Interest rates are one of the biggest influences on currency values. When a country's central bank raises interest rates, its currency often becomes more attractive because investors can potentially earn a better return on deposits and investments denominated in that currency.
That's why traders pay such close attention to decisions from central banks like the Bank of England, the Federal Reserve and the European Central Bank. Even hints about future rate changes can move the market before an official announcement is made.
In my experience, some of the biggest trends begin long before a rate decision itself. The market spends weeks, or even months, trying to anticipate what central banks are likely to do next.
Economic reports provide regular snapshots of a country's financial health.
Some of the biggest market-moving releases include:
Strong economic data often supports a country's currency, while disappointing figures can weaken it. Of course, markets don't always react in the obvious way. Sometimes the numbers are already priced in, which is why experienced traders focus as much on expectations as they do on the headlines.
Read more: Understanding Forex Fundamental Analysis
Not every price move is driven by economic data. Sometimes it's simply about confidence, or the lack of it.
When investors feel optimistic, they're generally more willing to buy higher-risk assets and currencies. During periods of uncertainty, however, money often flows into traditional safe-haven currencies such as the US dollar (USD) and the Swiss franc (CHF).
You'll often see this during geopolitical tensions, financial crises or unexpected global events. Even if a country's own economy hasn't changed overnight, shifts in market sentiment can still have a significant impact on its currency.
Read more: What Is Market Sentiment? Definition, Indicators and Strategies
As you begin trading, you'll notice that every currency pair has two prices rather than one.
The tighter the spread, the lower your trading costs. That's one of the reasons major currency pairs are so popular, particularly with day traders and scalpers who may place multiple trades throughout the day.
Read more: Bid and ask price explained: What it is and how it works in trading
You may also come across the terms direct quote and indirect quote.
They're simply different ways of expressing an exchange rate depending on which currency is used as the base currency. It's the same relationship viewed from a different perspective, so there's no need to overcomplicate it when you're first learning forex.
One thing that took me a while to fully appreciate was how much trading activity changes throughout the day.
For example, EUR/USD is usually at its busiest during the London–New York overlap, when European and American markets are both open. Liquidity is at its highest, spreads are often at their tightest and trade execution tends to be much smoother.
If you're learning to trade, simply focusing on those active market hours can make the experience far less frustrating than trying to trade during quieter sessions with thinner liquidity.
The important lesson is that currency pairs don't move randomly. They respond to interest rates, economic data and shifts in investor sentiment, all while being influenced by the time of day and the amount of liquidity flowing through the market. Understanding those drivers helps you make sense of the price action rather than simply reacting to it.
Read more: Best time to trade forex: When to enter the market during the day
A relatively small number of currency pairs account for most of the activity in the global forex market. According to the Bank for International Settlements (BIS) 2022 Triennial Central Bank Survey, the US dollar appears on one side of the vast majority of all foreign exchange transactions, while the major currency pairs dominate global trading volume. That's a reflection of market liquidity rather than a recommendation of what you should trade. Beginners and professionals alike choose different pairs depending on their strategy and objectives.
Rank |
Pair |
Nickname |
Pros |
Cons |
|---|---|---|---|---|
| 1 | EUR/USD | The Euro (Fiber) | Tightest spreads, exceptional liquidity, abundant market analysis | Can move slowly during quieter sessions |
| 2 | USD/JPY | The Yen (Ninja) | Highly liquid, often develops clean trends | Can react sharply to Bank of Japan comments or intervention |
| 3 | GBP/USD | The Cable | Strong liquidity and excellent daily movement | More volatile around UK and US economic news |
| 4 | USD/CNY | Dollar–Renminbi | Significant global trading volume | Managed exchange rate and limited retail accessibility |
| 5 | USD/CAD | The Loonie | Liquid and closely linked to oil prices | Energy market volatility can create sudden swings |
| 6 | AUD/USD | The Aussie | Good liquidity and popular risk sentiment indicator | Sensitive to commodity prices and global growth expectations |
| 7 | USD/CHF | The Swisse | Popular safe-haven currency with deep liquidity | Swiss National Bank intervention can influence price |
| 8 | EUR/JPY | Euro–Yen Cross | One of the most liquid cross pairs with strong trends | Influenced by both European and Japanese economic data |
| 9 | EUR/GBP | Euro–Sterling Cross | Stable trading conditions and relatively tight ranges | Often experiences lower volatility |
| 10 | USD/MXN | Dollar–Peso | Attractive liquidity among emerging-market currencies and popular for carry trades | Higher volatility and political risk than major pairs |
One thing you'll probably notice is that the top of the table is dominated by major currency pairs. That's no coincidence. High trading volume creates better liquidity, tighter spreads and smoother trade execution, which is exactly why majors remain the preferred choice for most traders worldwide.
There's no universal "best" currency pair. The right choice depends on your experience, trading style, appetite for risk and even the hours you're available to trade. What suits a full-time day trader won't necessarily suit someone checking the markets for an hour after work.
Here's how I'd generally approach it.
If you're just starting out, I'd stick to the major currency pairs, particularly EUR/USD and USD/JPY.
There are several reasons why they've remained beginner favourites for years:
When I first started trading, I made the mistake of watching far too many charts. Looking back, I'd tell any beginner to pick one or two major pairs and learn how they behave before expanding your watchlist. Once you understand their rhythm, adding more markets becomes much easier.
Some traders actively look for volatility because larger price swings can create more trading opportunities.
Pairs such as GBP/JPY often produce substantial intraday movement, while some exotic pairs can experience even larger swings during periods of economic or political uncertainty.
The trade-off is that bigger opportunities come with bigger risks.
One lesson every trader learns eventually is that volatility cuts both ways. The larger the daily range, the smaller your position size should generally be. Chasing excitement is rarely a trading strategy.
Your available trading hours should also influence which currency pairs you follow.
Trading Session |
Currency Pairs Commonly Traded |
|---|---|
| London Session | EUR/USD, EUR/GBP, GBP/USD |
| Asian Session | USD/JPY, AUD/USD, NZD/USD |
| New York Session | EUR/USD, GBP/USD, USD/CAD, USD/CHF |
Trading a currency pair during its busiest session usually means:
Trying to trade a pair when its home market is largely asleep often produces the opposite effect.
Every trader pays the spread, whether they realise it or not.
That's why traders who place lots of trades, particularly scalpers and active day traders, usually gravitate towards major currency pairs, especially EUR/USD.
Its exceptional liquidity means brokers can often offer the tightest spreads available.
It might only seem like a tiny saving on each trade, but costs add up surprisingly quickly. If you're entering dozens of positions every week, even a slightly wider spread can make a noticeable difference to your overall results.
The best currency pair isn't necessarily the one that moves the most. It's the one that matches your experience, your trading plan and the amount of risk you're genuinely comfortable taking. That's a far more sustainable way to approach the market than simply chasing whichever chart happens to be moving the fastest.
A currency pair in forex is a quotation showing the value of one currency relative to another, how much of the quote currency it takes to buy one unit of the base currency. Every forex trade involves buying one currency while simultaneously selling the other.
The seven major currency pairs are EUR/USD, USD/JPY, GBP/USD, USD/CHF, AUD/USD, USD/CAD and NZD/USD. Each includes the US dollar and together they account for the majority of global forex trading activity.
Buying a currency pair means you're buying the base currency while selling the quote currency. You're expecting the base currency to strengthen relative to the quote currency, causing the pair's price to rise.
Major currency pairs, particularly EUR/USD, USD/JPY and GBP/USD, are generally the best starting point for beginners. They offer high liquidity, tight spreads and plenty of educational resources, making them easier to understand than thinner, more volatile markets.
EUR/USD is usually the cheapest currency pair to trade because it typically has the tightest spreads in the forex market. USD/JPY is also known for relatively low trading costs, while major pairs are generally cheaper to trade than minor or exotic pairs.
Most beginners are better off focusing on one or two currency pairs rather than trying to monitor the entire market. As your experience grows and you develop a consistent trading strategy, you can gradually expand your watchlist.
Generally, yes. Exotic pairs tend to have wider spreads, lower liquidity and greater price volatility, making them more challenging to trade. Most new traders will find it easier to build confidence by starting with the major currency pairs.
Not exactly. Exchanging money is usually a one-off transaction for travel or business, whereas trading a currency pair involves speculating on whether one currency will strengthen or weaken relative to another in an attempt to make a profit.
A currency pair is the foundation of every forex trade. Rather than buying or selling a single currency, you're always comparing the value of one currency against another. Understanding the relationship between the base currency and the quote currency is the first step towards reading charts, interpreting market movements and making informed trading decisions.
It's equally important to understand that not all currency pairs behave the same way. Major pairs offer the highest liquidity, the tightest spreads and are generally the most suitable place for beginners to start. Minor (cross) pairs provide opportunities to trade the relationship between major economies without involving the US dollar, while exotic pairs can deliver larger price swings but usually come with higher costs and greater risk.
After years of trading, one thing has become clear to me: there isn't a single "best" currency pair. The right choice depends on your experience, your trading strategy, your tolerance for risk and even the hours you're available to watch the market. Finding the pair that suits your style is far more important than simply choosing the one that's making the biggest headlines.
Once you've got a solid understanding of currency pairs, the next logical step is learning the building blocks that sit alongside them, concepts such as spreads, pips and market liquidity. Together, they form the core language of forex trading and will make everything else you learn much easier to understand.
Lee W. is a seasoned professional trader with over 10 years of experience. Passionate about sharing valuable expertise and unique market insights, Lee W. now serves as an external and independent market analyst for RADEX MARKETS.
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