The term “major” refers to the most heavily traded or widely followed currency pairs globally. These include the EUR/USD, GBP/USD, USD/JPY, AUD/USD and USD/CAD. These pairs account for the majority of trading volume in the FX market and are considered the most important.
Difference between pairs?
The main difference between major, minor, and exotic pairs is liquidity. Major pairs are the most liquid pairs, followed by minor and exotic pairs.
The major pairs are the most popular currency pairings and have the highest trading volume. They include EUR/USD, USD/JPY, GBP/USD, AUD/USD and USD/CHF.
The minor pairs are less popular than the major ones but still have a high trading volume. They include EUR/GBP, USD/CAD, AUD/NZD and NZD/JPY.
Exotic currency pairings usually have low liquidity and are riskier to trade. They include EUR/TRY, USD/ZAR, GBP/CZK and AUD/HUF.
For now, we will only look at major pairs.
How to use major pairs?
Pairs can be used to trade a wide variety of strategies, including:
Trading the trend
Trading the trend is one of the most popular strategies in Forex. You can use pairs to identify when a particular currency is trending up or down and then trade accordingly.
When the price of a currency pair reverses, it means that the direction of the pair has changed and is now moving in the opposite direction. You can use pairs to identify potential reversals and then trade accordingly.
Many traders use indicators to help them determine when to buy or sell a currency pair. You can
use pairs to help you confirm signals generated by indicators.
This is a type of trading in which you buy and sell currency pairs to profit from the spread.
Traders can use loads of other strategies with pairs, but these are some of the most common. As you build more experience, you will undoubtedly develop your strategies.
How to choose your major pair
In 2022, the most popular pairs will likely be EUR/USD, USD/JPY, and GBP/USD. These pairs are all highly liquid and have a high volume of trades. They are also relatively stable, meaning that their prices do not fluctuate as much as other pairs. As a trader, it is essential to be familiar with these three pairs, as they are likely to be the most profitable ones to trade in 2022.
So, how do you go about choosing a major pair to trade? Well, there is no one-size-fits-all answer to this question. It all depends on your trading style and risk tolerance. However, if you’re starting, it may be best to focus on the EUR/USD or GBP/USD as they are the most popular and therefore have the most liquidity.
Alternatively, if you’re looking for higher profits potential, you may want to consider trading the USD/JPY or AUD/USD. Make sure you do your research before investing any money in the market.
Benefits to trading major pairs
There are several benefits to trading the major pairs:
- They are the most liquid pairs in the market, meaning you can get in and out of them quickly and easily.
- They are very volatile, leading to significant price swings and, therefore, potential profits.
- They are closely correlated to the global economy, so their movements can gauge overall market sentiment.
Risks associated with trading major pairs
However, there are also some risks associated with trading these pairs:
- They can be pretty risky as volatility can lead to sharp price movements.
- Economic conditions heavily influence them, so any change in the global economy can significantly impact their prices.
- They are not as well correlated to other markets as some pairs, so predicting their movements can be more challenging.
Although there are many pairs to choose from, you as a trader need to weigh the options, go with your gut and start trading.