Forex trading involves buying one currency and selling another in the same trade. The relative prices between the currencies fluctuate based on several factors. Major Forex currency pairs include EUR/USD, GBP/USD, and several others, all of which contain the US Dollar. They are highly liquid with high trading volume. Cross-currency or minor pairs are those that don’t include the USD. There are Euro crosses (e.g., EUR/CAD), Yen crosses, and Pound Crosses. Exotic currency pairs involve one major currency and one smaller currency. The smaller ones might be “Scandies” from Denmark, Sweden and Norway, or emerging market “BRICs” from Brazil, Russia, Indonesia, India, China and South Africa.
- The currency pairs considered majors are the top ten traded which all have USD in the pair.
- Pairs that aren’t with U.S. money are considered cross-currency such as EUR/GBP which is Euro to British Pounds.
- There are other cross pairs for specific currencies such as Yen crosses and Pound crosses.
“For example, the euro and the U.S. dollar (EUR/USD) or the British pound and the Japanese yen (GBP/JPY).”