The Most Common Currencies Used in the Forex Market

The Forex market is where you trade currencies. You buy one currency by selling another. In essence, what you're always trading are currency pairs, make up of two currencies, in which the price of the pair is the value ration between one currency and the other. For instance, if we take the EUR/USD pair and say its value today is 1.4000, it means that each Euro which is the first currency in the pair is worth 1.4000 US Dollars.

There are dozens of currency pairs in the Forex market as there are many countries in the world. These currency pairs are usually divided into two groups: Forex majors and Forex exotics.

The Forex Majors are a group of 6-7 pairs which make up the bulk of the trading volume in the market. These include the EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD, and USD/CAD. As you can see, the currencies of the Eurozone, Britain, US, Canada, Switzerland, Japan, and Australia are represented.

In this small group the 4 earlier pairs in the list are a group among themselves as they are truly the center of the market. There are currency traders who trade these pairs alone as they're the ones with the most volume, lower spreads, and offer better trading opportunities.

In addition, many of the trading tools and methods are made with the majors in mind and may not work as well, or at all, for the exotics.

The exotic pairs, which are basically everything that's left, are usually traded rather thinly and often have higher spreads, the commissions Forex brokers keep for themselves. This makes them less appealing to trade.

If you're a beginner trader, I recommend sticking with the Major Pairs until you get more experience. For one thing, much of the education material available is better formed for the Forex majors. Second, you can build a successful Forex venture with these pairs alone without ever having to trade with the exotics due to the high volume. Third, the low spreads are especially important when you're just starting out until you learn how to take bigger profits from the market.

Later, as you become a better trader, you can begin experimenting with exotic pairs but know that they may behave totally differently than the majors so they may require special care and attention. For now, stick with the majors and study them well.

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