Over the last decade or so, there has been no form of financial investment that has gathered as much attention and interest as foreign exchange rates trading. Since online forex brokers became mainstream, offering mini accounts to regular, retail traders, the popularity of this leveraged trading style has grown beyond all recognition. Today it stands as the largest financial market by trading volume that exists, with over a trillion dollars in currency trading through the markets every single day. This is divided across markets for different types of international currencies, paired with different currency bases in order to provide a point of price context.
Everyone can trade in forex markets, but not everyone has the ability to be successful when they trade in this environment. So what currencies should traders look to get involved with in order to trade successfully, and what are the different overriding classifications of forex trading pairs?
Major Foreign Exchange Rates Pairs
The largest classification of currency pairs that exists in forex markets is known as the major pairs. Major pairs are any currency pair that is denominated in USD, essentially. Given the volume of trading in USD, these currency pairs tend to be amongst the most liquid, and therefore offer traders the most fluid price curve on which to start their trading. Major pairs are more transparent, and there is much more material to go on in terms of your research and analysis work. While many, many traders do business in these markets, there are still opportunities that exist for ordinary traders to profit from the directional movement of respective currency prices. Many traders choose to specifically stay within the currency majors, as a steady, safer means of trading their capital for profit.
Cross Foreign Exchange Rates Pairs
The next most popular type of market that traders can come to invest in is known as the cross pair, and these are any other large currency markets that do not use the dollar. Originally, every currency transaction was required to be processed in dollars – so, Australian dollars to pound sterling would have to be AUD – USD, USD – GBP. For this reason, the innovation of trading in pairs that were not denominated in USD came to be known as cross pairs, because it is cross the norm. Cross pairs are often a little more volatile and a little less liquid than those markets that are traded as the majors. Nevertheless, particularly for Aussie traders, there are serious advantages to be had from using your own knowledge to inform cross trade currency positions.
Exotic And Other Foreign Exchange Rates Pairs
There are many different currency pairs that you can trade that are not neatly a major or cross currency pair. These pairs can range from the topically interesting through to the tiny, insignificant trading that goes on through the minor currencies. While there may be opportunities for profiting from these markets, they are generally considered to be a bit too risky for most forex traders, who prefer instead to stick to what is being more heavily covered in the financial media.