Trading goldGold pays no interest. That single fact drives most of what it does, and it explains why the metal can fall on the day inflation comes in hot.What are currency pairs?
Every forex trade is a comparison, not a purchase. You are never simply buying euros - you are buying euros with dollars, and the price can move because of either side.
A share has a price in one currency. A currency does not. Ask what a euro is worth and the only honest answer is another question: worth in what?
So forex quotes two at a time. EUR/USD at 1.1000 means one euro costs 1.10 US dollars. The first currency is the base - the thing being priced. The second is the quote - the thing it is priced in. Every number on a forex platform is that relationship and nothing else.
Buying and selling, without owning anything
Buying EUR/USD means taking a position that gains if the euro strengthens relative to the dollar. Conceptually you are long euros and short dollars at the same time - you cannot be one without being the other.
Selling reverses it. There is no borrowing to arrange and no short-sale mechanics to worry about, because in a currency pair one side is always being sold. This is the one market where going short is structurally no different from going long.
The seven majors
A pair is called a major when it contains the US dollar and one other heavily traded currency. Different sources will hand you a slightly different list, but these seven are on all of them.
| Pair | What it compares |
|---|---|
| EUR/USD | Euro against US dollar: the most heavily traded pair in the world |
| USD/JPY | US dollar against Japanese yen: highly sensitive to rate differentials |
| GBP/USD | Pound against US dollar: larger typical swings than the other majors |
| USD/CHF | US dollar against Swiss franc: the franc has a defensive reputation |
| AUD/USD | Australian dollar against US dollar: carries commodity and China exposure |
| USD/CAD | US dollar against Canadian dollar: energy prices are one input, not the only one |
| NZD/USD | New Zealand dollar against US dollar: the smallest of the seven by volume |
The dollar appears in every one. That is not a coincidence. It is the currency most international trade, borrowing and commodity pricing runs through, so it ends up on one side of the busiest markets.
Why the dollar is sometimes first and sometimes second
USD/JPY, USD/CHF and USD/CAD put the dollar first. EUR/USD, GBP/USD, AUD/USD and NZD/USD put it second. There is no rule you can derive this from - it is convention, settled by decades of market habit, and you simply learn it.
It matters only because it decides which direction is which. Buying USD/JPY is a bet on the dollar. Buying EUR/USD is a bet against it. The same view produces opposite buttons.
Minors and exotics
Everything that is not a major falls into one of two groups, and the labels are about market structure rather than importance.
Minors, or crosses
Two major currencies with no US dollar between them: EUR/GBP, GBP/JPY, EUR/JPY, AUD/NZD.
Called crosses because converting between them historically went through the dollar as an intermediary. Most are now quoted directly.
Minor does not mean quiet. GBP/JPY routinely moves further in a session than several of the majors, because both currencies react sharply to rate expectations.
Their real use is isolating a view. If you are bullish sterling and bearish yen, GBP/JPY expresses exactly that. Trading GBP/USD and USD/JPY separately would smuggle a dollar position in alongside it.
Exotics
A major paired with a smaller or less heavily traded currency: USD/TRY, USD/ZAR, USD/MXN, USD/PLN.
Exotic describes its position in the global market, not the country. Some of these economies are very large.
What changes is the trading conditions. Lower liquidity means wider spreads, larger gaps and more variable execution, and those costs are the reason to be careful, not the volatility itself.
Interest rate differences can also be extreme, which makes overnight financing a much bigger component of the result than it ever is on EUR/USD.
None of these categories tells you the risk of a trade. A small exotic position can put less of an account at stake than an oversized EUR/USD one.
How many pairs a broker actually offers
Pair count is one of the loudest numbers in broker marketing and one of the least useful. Here is the spread across the hundred brokers in our records.
- 300the most offeredCMC Markets. Saxo Bank is next at 185, then Trading 212 at 150.
- 60the medianHalf of all brokers sit above this, half below. It is more than most people trade in a lifetime.
- 28the fewestRoboForex. Trade Nation and NordFX both offer 30.
Ninety-five of the hundred publish a figure. The gap between 28 and 300 is almost entirely exotics: every broker on the list carries all seven majors.
The difference between a 28-pair broker and a 300-pair broker is 272 markets you were never going to trade.
Where a cross rate comes from
You can derive most crosses from two dollar pairs, which is a useful sanity check when a quote looks wrong.
EUR/GBP from EUR/USD and GBP/USD
- EUR/USD1.1000
- GBP/USD1.2500
- Divide one by the other1.1000 ÷ 1.25000.8800
Approximate EUR/GBP0.8800The tradable bid and ask will sit either side of this. GBP/JPY works the same way but multiplied: GBP/USD × USD/JPY.
Before you trade a pair
Five questions that take a minute and prevent most of the avoidable mistakes.
- Which currency am I actually buying, and which am I selling?
- Which two central banks set policy for this pair?
- Is there scheduled data for either economy in the next few hours?
- What is the spread on this pair, rather than on the pair the advert quoted?
- Do my other open positions already contain this currency on the same side?
Common questions
What is the base currency?
The first one in the pair. The quoted price tells you how much of the second currency it takes to buy one unit of the first.
What does EUR/USD at 1.1000 mean?
One euro is worth 1.10 US dollars.
Is a pip always 0.0001?
For most pairs, yes. Pairs quoted against the Japanese yen conventionally use 0.01 instead, because the exchange rate runs in the hundreds rather than near one.
Is one lot the same risk on every pair?
No. Pip value varies with the pair, the exchange rate and your account currency, and typical daily movement varies enormously between EUR/USD and an exotic. Size from the stop distance rather than from the lot number, as set out in position sizing.
Are exotic pairs riskier than majors?
They generally have wider spreads, thinner liquidity and larger gaps, so the same nominal position is harder to get in and out of. But actual account risk is decided by position size and leverage, not by the category label.
Which pair has the lowest spread?
EUR/USD, at almost every broker, because it is the most heavily traded market in the world. Across our records the median average EUR/USD spread is 0.3 pips and the range runs from effectively zero on commission-based accounts up to 2.0.
How many pairs should I trade?
There is no right number. The useful test is whether you can name the central banks, follow the scheduled data and keep track of the combined currency exposure across everything you have open.
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Nothing here is financial advice. Leveraged products can lose more than they make.
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