According to the United Nations, there are 180 circulating currencies all over the world. However, did you know that there are only a few currencies that are used for trading in the forex trade and market repetitively? This is because only the most profitable, stable, and liquid currencies are used for trading in the forex market.
For instance, the American Dollar of the US financial system is number 1 in the list of the most traded currencies in the world. This is because of the strength and size of the US dollar. The US dollar is also the safest currency to save and invest in until now.
In this post, you are going to learn what are the major forex pairs, and what factors affect the prices of these currencies. Let’s get straight into it!
What Are Major Currency Pairs?
In the forex marketplace, the most actively traded pairs of currencies are called the Major Currency pairs. The prices within these pairs change slowly, but they can be unstable. There are top Four major currency pairs in the forex market such as
1. (EUR/USD)Euro and US dollar (Fiber)
2. (USD/JPY.)US dollar and Japanese yen (Gopher)
3. (GBP/USD)British pound sterling and US dollar (Cable)
4. (USD/CHF).US dollar and Swiss franc (Swissie)
The most-traded ‘Commodity’ currencies are mainly three as follows:
1. (AUD/USD), Australian Dollar and United States Dollar (Aussie)
2. (USD/CAD )US dollar and Canadian dollar (loonie)
3. (NZD/USD)US dollar and Swiss franc (kiwi)
These most actively traded currencies are also included in the Group of Ten (G10) currency group. These major currencies provide a notable quantity of volume within the economic transactions.
Why Do Traders Trade the Major Pairs?
Nearly all traders trade the major pair currencies because of the high amount of volume they have. These currencies have a smaller spread as compared to foreign pairs. The volume is kept high because most traders are interested in them.
Another advantage they’ll get by trading the major currency pairs on forex is they’ll also be able to enter and then exit the market with big portion sizes easily. Whereas in currency pairs having low volume tend to be harder to buy or sell a big position without making the price fluctuate notably.
More people are interested in buying or selling with a higher volume currency pair. The outcome by doing this is that you’ll have a little chance of slippage in forex trading.
How Are Prices of the Major Pairs Determined?
The prices of the forex major pairs are determined by the main basics that are discussed below:
Politics – The instability in forex market currencies are caused by elections, corruption scandals and change in policies. The power to rise or fall a currency’s relative value belongs to the government.
Interest Rates – Interest rates are essential for traders in the forex market. This is due to the rise in the rate of return. The higher the interest is made on the invested currency higher the profit will be.
Economic Data – Economic data reports provide the idea of the performance of the state’s economy. CPI data, non-farm payroll, retails sales, purchasing managers index and others are important economic data that determines the currency rates.
Volatility How extreme a market’s price is changing is measured by its volatility. Lower volatility is caused by the forex assets moving in little increments due to their high liquidity. The price fluctuation occurs when more are traded at the same time.
How to trade the major forex pairs
Here’s the roadmap on how you can trade the major forex pairs and make a profit.
1. Find out and research about the forex pair you wish to trade.
2. Conduct a basic and technical analysis on that certain forex pair.
3. Select a trading strategy for forex and examine that you’re okay and comfortable with your vulnerability to risk
4. Create your account and deposit funds
5. Open, examine and close your first position
In an ocean of floating currencies all over the world, the top major currencies are the most actively traded currencies. Always research about a currency before you plan to buy it. Always take as much risk as you’re comfortable with. Almost everything you need to know about the forex major pairs list has been covered in this short guide. I hope you found this post helpful and resourceful.