7 Major Currency Pairs - Forex Currency Pairs

Market turnover is approximately 7.2 trillion dollars per day, 95 percentage% of all trading transactions are performed by speculators for profit. The Majority of these transactions is comprised of the five major currencies which are comprised of:

The Currency Pairs for These Currencies Are

EURUSD
GBP/USD
USDCHF
USDJPY
AUD USD
EURJPY
GBP JPY

The above symbols represent currencies of their various countries, the three letter naming format is used. This is the format used in FX when trading these currencies, for those not familiar with currency symbols the above represent the following; USD - US Dollar, EUR - EURO, GBP - Great Britain Pound, JPY - Japanese Yen and CHF - Swiss Franc.

The USD is the most traded pair

USD - 85 % of all daily market transactions

EUR - 40% of all

JPY - 20 percent% of all

GBP - 13 percentage% of all

CHF - 9 percentage% of all

US Dollar or USD - the United States dollar is the main currency of the world. It is used as the standard measure of all other currencies which are transacted in the trading market. All others are generally quoted in terms of US dollar.

The USA dollar is a safe haven currency, because it's held as a reserve by many central banks. In times of economic recession the dollar will strengthen due to the fact that investors buy the dollar because of its safe haven status. On the other hand when the economies are doing well people will go for those that are higher yielding such as the EURO, Pound, Swiss Franc & Australian Dollar.

In the market the dollar is traded against other major currencies, these are Euro, Japanese Yen, British Pound and Swiss Franc.

Euro or EUR - Euro has a strong international influence because it represents 17 Euro-zone member countries of the European Monetary Union. Because the Euro represents 17 economies, this makes the Euro the second most transacted after the USA dollar.

Japanese Yen or JPY - Japanese Yen is the third most transacted in the world because of its liquidity. Japanese economy is the second biggest economy after the USA economy.

British Pound or GBP - Britain economy is the third largest economy after the US and the Japanese Economy. This makes the British pound liquid and it is the 4th most transacted in the market.

Swiss Franc or CHF - Swiss Franc is the only major of a major European country that doesn't belong to the European Monetary Union or G-7 countries. Although the Swiss economy is relatively small, the Swiss Franc is one of the five major currencies in the Market. This is because of the strength of the Swiss banking system and the Swiss economy which makes the Swiss Franc stable with a high demand that exceeds supply.

The Canadian Dollar or CAD and the Australian Dollar or AUD are also part of the currencies traded on the market but these do not count as being part of the majors because of their illiquidity.

After classifying the currencies, there are two categories:

Major pairs
Crosses

Major Pairs

Currencies are traded in pairs of two e.g. EURUSD

Majors have a combination of the USD and one other major(EUR, JPY, GBP, CHF).

The 4 major pairs or the big four in Forex are:

EUR USD
USDJPY
GBPUSD
USD/CHF

These are the most traded because they have a high turnover & are the most profitable.

These are the best pairs for day trading, if you as the trader want to make the most profit it is best to trade only these four majors only.

Daily Turnover of Currencies by Volumes

USD is the most traded, followed by EUR, GBP, JPY & CHF, the daily turnover volume share taken by each of these 5 in terms of percent is illustrated below:

USD - 85%

EUR - 40 %

JPY - 20%

GBP - 13 %

CHF - 9%

Since transactions are in pairs the total will be 200 percent%

For example the EURUSD pair: EUR USD = 100 percentage% EUR + 100 % USD

Summing up the total of the large four pairs= 85 + 40 + 20 + 13 + 9 = 167 percent% . Note these four are made up of five individual currencies which make up the sum total of 167%. This percent% of the total turnover volume is what makes these four pairs to be referred to as major pairs or in short "majors". This lion share of the total turnover daily volume is also what makes these 4 the best forex pairs to trade especially among the Day Traders.

Therefore volume for Majors is:

FX Major Pairs = 167 percentage% of all turnover

Other Pairs Combined = 33 percent% of all turnover

Best Pairs to Trade: Because the majors are the most actively traded, many experienced investors only trade the majors because these are highly liquid and their movement tends to be more predictable. This makes these majors; USD, EUR, GBP, JPY and CHF the best to analyze using trading analysis as they are the most liquid.

The greater the liquidity, the more the volatility, volatility means a currency is likely to trend in one particular direction and when prices are heading in a particular direction it's easier to make money as opposed to when the prices are not heading in a particular direction - range market.

On the other hand, all the other pairs, also known as minor currency pairs that make 33% of all daily turnover and are said to be illiquid, meaning they do not have a lot of volatility and as such most of their price movements are choppy or range bound. These means that the minors are the most hard to analyze using trading analysis studies because they do not show defined market movements in one particular direction (they don't move in a trend).

For Example by just trading EURUSD then a trader will be participating on 85 + 40 = 125% of all turnover volume, which is two-thirds of all transactions. This is another reason why some just stick to the EURUSD alone.

Currency Crosses

These are the pairs that do not have USD & involve cross-currency transactions.

Example:

EUR JPY
GBPJPY
EUR GBP
AUDJPY
GBP CHF
EURCHF
CHF JPY

To buy EURJPY you first buy EURUSD & then buy USDJPY.

This means to buy EURJPY you'll have traded two other major forex pairs. This is why the major pairs have large turnover volumes because all minors will involve these two majors.

This is because in the market you can't sell or buy the EUR directly for the JPY you have to convert EUR in to USD then using the USD you have to buy JPY. This is why these are called crosses because of the cross transactions using USD. This also is why USD takes up 85% of all transactions, because it's the base currency of all exchange transactions.

To buy GBPJPY you first buy GBPUSD & then buy USDJPY

This also is why the spread of these crosses is higher than that of the major pairs, because you will be transacting two transactions simultaneously when buying or selling these crosses.

Crosses are also not very liquid & therefore aren't highly traded by most investors, this is why these Forex currencies tend to have less predictable movements because their volumes of transaction turnover isn't very high.

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