Forex trading involves buying one currency while simultaneously selling another. Currencies are always traded in pairs, meaning you’re speculating on the exchange rate between two different national currencies.
For example, when trading the EUR/USD pair, you’re essentially buying the euro and selling the U.S. dollar, or vice versa.
Trading in the forex market is done through a forex broker or a CFD provider (Contracts for Difference). These platforms provide access to various currency pairs, which are quoted in terms of one currency relative to another.
Understanding Currency Pairs
Currency pairs work like a tug-of-war. If one currency gains strength, it usually means the other is weakening relative to it. The exchange rate reflects how much of the second currency (quote currency) is needed to purchase one unit of the first currency (base currency).
These rates constantly change based on global supply and demand, economic data, interest rates, and political events.
Currency pairs fall into three major categories:
- Major Pairs
- Cross Pairs (Minors)
- Exotic Pairs
Major Currency Pairs
Major pairs always include the U.S. dollar (USD) and are the most actively traded and most liquid in the forex market. Liquidity refers to how easily a currency can be bought or sold without significantly affecting its price.
There are seven major currency pairs, even though eight currencies are considered major. These pairs have tight spreads, frequent price movements, and high trading volumes, offering more trading opportunities.
| Currency Pair | Countries Involved | Common Nickname |
|---|---|---|
| EUR/USD | Eurozone / USA | Euro Dollar |
| USD/JPY | USA / Japan | Dollar Yen |
| GBP/USD | UK / USA | Pound Dollar |
| USD/CHF | USA / Switzerland | Dollar Swissy |
| USD/CAD | USA / Canada | Dollar Loonie |
| AUD/USD | Australia / USA | Aussie Dollar |
| NZD/USD | New Zealand / USA | Kiwi Dollar |
Cross Currency Pairs (Minors)
Cross currency pairs, or simply “crosses,” are pairs that do not include the U.S. dollar. When they involve two major currencies (excluding USD), they’re often called minor pairs. Although less liquid than majors, they are still heavily traded and offer strong trading opportunities.
Euro Crosses
| Currency Pair | Countries | Nickname |
|---|---|---|
| EUR/CHF | Eurozone / Switzerland | Euro Swissy |
| EUR/GBP | Eurozone / UK | Euro Pound |
| EUR/CAD | Eurozone / Canada | Euro Loonie |
| EUR/AUD | Eurozone / Australia | Euro Aussie |
| EUR/NZD | Eurozone / New Zealand | Euro Kiwi |
| EUR/SEK | Eurozone / Sweden | Euro Stockie |
| EUR/NOK | Eurozone / Norway | Euro Nockie |
Yen Crosses
| Currency Pair | Countries | Nickname |
|---|---|---|
| EUR/JPY | Eurozone / Japan | Euro Yen or Yuppy |
| GBP/JPY | UK / Japan | Pound Yen or Guppy |
| CHF/JPY | Switzerland / Japan | Swissy Yen |
| CAD/JPY | Canada / Japan | Loonie Yen |
| AUD/JPY | Australia / Japan | Aussie Yen |
| NZD/JPY | New Zealand / Japan | Kiwi Yen |
Pound Crosses
| Currency Pair | Countries | Nickname |
|---|---|---|
| GBP/CHF | UK / Switzerland | Pound Swissy |
| GBP/AUD | UK / Australia | Pound Aussie |
| GBP/CAD | UK / Canada | Pound Loonie |
| GBP/NZD | UK / New Zealand | Pound Kiwi |
Other Common Crosses
| Currency Pair | Countries | Nickname |
|---|---|---|
| AUD/CHF | Australia / Switzerland | Aussie Swissy |
| AUD/CAD | Australia / Canada | Aussie Loonie |
| AUD/NZD | Australia / New Zealand | Aussie Kiwi |
| CAD/CHF | Canada / Switzerland | Loonie Swissy |
| NZD/CHF | New Zealand / Switzerland | Kiwi Swissy |
| NZD/CAD | New Zealand / Canada | Kiwi Loonie |
Exotic Currency Pairs
Exotic pairs consist of one major currency and one emerging market currency (e.g., from Brazil, Mexico, or Turkey). These pairs are less liquid and often come with wider spreads (higher transaction costs). They are more volatile and sensitive to economic and political instability.
| Currency Pair | Countries | Nickname |
|---|---|---|
| USD/BRL | USA / Brazil | Dollar Real |
| USD/HKD | USA / Hong Kong | – |
| USD/SAR | USA / Saudi Arabia | Dollar Riyal |
| USD/SGD | USA / Singapore | Dollar Sing |
| USD/ZAR | USA / South Africa | Dollar Rand |
| USD/THB | USA / Thailand | Dollar Baht |
| USD/MXN | USA / Mexico | Dollar Mex |
| USD/RUB | USA / Russia | Dollar Ruble |
| USD/PLN | USA / Poland | Dollar Zloty |
| USD/CLP | USA / Chile | – |
Due to lower trading volumes, these pairs are more prone to sudden, unpredictable movements, especially during political unrest or economic announcements.
G10 Currencies
The G10 currencies are the ten most traded and liquid currencies in the world. They’re popular in forex trading due to their strong economies, political stability, and reliable financial institutions.
| Country | Currency Name | Code |
|---|---|---|
| United States | Dollar | USD |
| Eurozone | Euro | EUR |
| United Kingdom | Pound Sterling | GBP |
| Japan | Yen | JPY |
| Australia | Dollar | AUD |
| New Zealand | Dollar | NZD |
| Canada | Dollar | CAD |
| Switzerland | Franc | CHF |
| Norway | Krone | NOK |
| Sweden | Krona | SEK |
The Scandies: Scandinavian Currencies
“Scandies” refer to the currencies of Denmark, Sweden, and Norway — all part of the broader Scandinavian region. These countries once shared a currency union but now operate independently. Still, their currencies retain similar names, derived from the word “crown” in their native languages.
| Country | Currency Name | Code |
|---|---|---|
| Denmark | Krone | DKK |
| Sweden | Krona | SEK |
| Norway | Krone | NOK |
Fun fact: Saying “hook me up with some crowns” actually means something in forex!
Final Thoughts
There are 180 official currencies globally, but only a fraction are actively traded on forex platforms. Most brokers offer up to 70 currency pairs, focusing primarily on majors, minors, and a few exotics.
Understanding how currency pairs work — including their categories, liquidity, and economic sensitivity — is essential for any successful forex trader. Choose your pairs wisely based on your risk tolerance, trading strategy, and market knowledge.
If you’re just getting started, it’s smart to stick with major currency pairs, as they are the most liquid and cost-effective to trade.
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