Major Currency Pairs Traded in the Market and Minor/Crosses

Currency Pairs traded in the online market are classified in two categories depending on the volume of trade of these currency pairs. Currency Pairs with a high volume of trade are classified as Major FX Pairs and these major currency pairs are the most traded currency pairs in the market. Then there is Minor FX Pairs and these are currency pairs that don't have a high trade volume turnover. When it comes to trading, Major Currency Pairs are more popular than Minor Currency Pairs - This is because Major Currency Pairs are more Liquid than Minor FX Pairs.

Market turnover is approximately 7.2 trillion dollars per day, 95 percent of all trading transactions are performed by retail traders for profit. The Majority of these trade positions is comprised of the five major Forex currencies that are comprised of:

The above forex currency symbols represent currencies of their different countries, using the 3 letter naming format is used to name currencies. This is the format used in Forex 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 currency

USD - 85 % of all daily market transactions

EUR - 40% of all trading transactions

JPY - 20% of all trading transactions

GBP - 13 % of all trading transactions

CHF - 9 % of all trading transactions

US Dollar or USD - the United States dollar is the main currency of the world. It's used as the standard measure of all other currencies which are transacted in the market. All other currencies 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 US dollar will strengthen due to the fact that investors buy the US dollar because of its safe haven status. On the other hand when the economies are doing well traders will go for those that are higher yielding like the EURO, Pound, Swiss Franc and Australian Dollar.

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

Euro or EUR - Euro has got a strong international influence because it represents 17 EU Zone member countries of EuroZone Monetary Union. Because the Euro represents 17 economies, this makes the Euro the second most traded currency after the US dollar.

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

British Pound or GBP - Britain economy is the third largest/biggest economy after the US & 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 which doesn't belong to the European Monetary Union or G7 countries. Although the Swiss economy is relatively small, the Swiss Franc is one of the 5 major currencies in the Market. This is because of the strength of the Swiss banking system & the Swiss economy which makes the Swiss Franc stable with a high demand which exceeds supply.

The Canadian Dollar or CAD & the Australian Dollar or AUD are also part of the currencies transacted on the market but these don't count as being part of the major pairs because of their illiquidity.

After classifying the currencies, there are two categories:

Major Forex Pairs
Currency Crosses - Minor Currency Pairs

Major Forex Pairs

Currencies are traded and transacted in pairs of two e.g. EUR USD

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

The 4 major currency pairs or the big four in fx are:

EUR USD
USD JPY
GBP/USD
USD/CHF

These are the most traded currency pairs because they have a high turnover and are the most profitable.

These are the best currency pairs for day trading, if you as the trader want to make the most profit it's best to only trade these 4 majors only.

Daily Turnover of Forex Currencies by Volumes

USD is the most transacted currency on the market, followed by EUR, GBP, JPY & CHF, the daily turnover volume share taken by each of these 5 currencies in terms of percent is illustrated and shown below:

USD - 85 %

EUR - 40 %

JPY - 20 %

GBP - 13 %

CHF - 9 %

Since Forex trading transactions are in pairs the total will be 200 %

For illustration the EURUSD currency pair: EURUSD = 100 % EUR + 100 % USD

Summing up the total of the big four currency pairs = 85 + 40 + 20 + 13 + 9 = 167 % . Note these four currency pairs are made up of 5 individual currencies that make up the sum total of 167%. This percentage of the total trade turnover volume is what makes these four currency pairs to be known as major currency pairs or in short "majors". This lion share of the total turnover daily forex trading volume is also what makes these 4 currency pairs - the best currency pairs to trade especially among the Day Traders.

Therefore volume for Major Currencies is:

Forex Major Currency Pairs = 167 % of all trading turnover

Other Forex Pairs Combined = 33 % of all trading turnover

Best FX Pairs to Trade: Because the major currencies are the most actively traded in the online market, many experienced investors only trade the major currency pairs because these are highly liquid and their price trends movement tends to be more predictable. This makes these major currencies; USD, EUR, GBP, JPY & CHF the best to analyze & interpret using trading analysis as they're 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 the prices are moving in a particular direction in a trend it is easier to make money as compared to when prices aren't heading in a particular direction - range market.

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

For example by just forex trading EURUSD then one will be participating on 85 + 40 = 125% of all trading turnover volume, which is two-thirds of all trade positions. This is another reason why some traders just stick to trading the EURUSD currency pair alone.

Currency Crosses

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

Example:

EUR JPY
GBP JPY
EUR GBP
AUD/JPY
GBP CHF
EUR CHF
CHF JPY

To buy EURJPY you first buy EURUSD & then buy USD JPY.

This means to buy EURJPY currency pair in forex you'll have transacted two other major currency pairs. This is why the major currency pairs have large turnover forex trading volumes because forex transactions of all minor currency crosses will involve these 2 major currency pairs.

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

To buy GBPJPY you first buy GBPUSD and then buy USD JPY

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

Currency crosses are also not very liquid and thence are not highly transacted by most investors & traders, this is why these minor currency pairs tend to have less predictable price moves because their volumes of trade trade transaction turnover isn't very high.

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