It's important to know the differences between major and minor currency pairs before you think about
adding either or both of them to your portfolio. Our guide will take you through what they are and how they're
made up, as well as discussing the similarities and contrasts between the two. Read on to find out more with
Tradu.
Read our forex trading guide
Read our currency pairs guide
Major and minor currency pairs: What to expect
from our guide
- What is a major currency pair?
- Examples of major currency pairs
- What is a minor currency pair?
- Examples of minor currency pairs
- The similarities between trading major and minor currency pairs
- The differences between major and minor currency pairs
- Major and minor currency pairs: Decide which is right for you with Tradu
What is a major currency pair?
The exact definition of what classes as a major currency pair can vary slightly but, broadly speaking,
they are the most frequently traded pairs in the forex market. They're made up of currencies from five of the
largest global economies, which are:
- The US dollar (USD)
- The euro (EUR)
- The Japanese yen (JPY)
- The British pound (GBP)
- The Swiss franc (CHF)
According to data from the Bank for International Settlements, these five all feature in the top eight
individual currencies in terms of average daily turnover in the over-the-counter (OTC) foreign exchange market.
The four pairs traditionally thought of as the majors are all in the top seven, too. You can find out more about
these major currency pairs outlined below, while you can also further enhance your education with our in-depth
guide.
Find out more in our guide to major
currency pairs
Examples of major currency pairs
All of the major currency pairs contain one common denominator: the USD, which is by far the most popular
individual currency and, as of April 2022, was involved in 88.5% of all OTC forex trades. Some traders do class
other pairs that don't include the USD – such as GBP/EUR or EUR/JPY – as majors. These are also often referred
to as cross currencies, or minor currency pairs, which we'll come to later.
But the four pairs widely regarded as the majors are:
- USD/EUR: The most popular pair in the world, with more than $1.7 trillion worth of trades executed on
a daily basis. Nicknamed 'Fiber', partly to differentiate it from USD/GBP, which is often referred to as
'Cable'.
- USD/JPY: Typically quoted to two decimal places rather than four due to the JPY's relatively low
value. Nicknamed 'Gopher', USD/JPY is the second-most-traded pair globally, with average daily trades
totalling £1 trillion.
- USD/GBP: Can share similarities with USD/EUR because of the pound's close correlation to the euro.
Nicknamed 'Cable' after the deep-sea wires used to carry pricing information between London and New
York. Average daily turnover of $714 billion.
- USD/CHF: Nicknamed 'Swissie', USD/CHF is seen by many as a safe-haven pair due to the franc's typical
stability even in the face of wider economic uncertainty. Its daily average turnover amounts to $293
billion.
What is a minor currency pair?
A minor currency pair is typically defined as one that doesn't include the USD but is made up of two of
the other major global currencies. Their average daily trading turnover can still total billions of dollars, but
not quite to the same amounts as the major currency pairs. Trading minor pairs can offer opportunities, as they
tend to experience greater volatility, but there is also a greater level of risk involved as a result.
Find out more in our guide to minor
currency pairs
Examples of minor currency pairs
Minor currency pairs are not to be confused with exotic pairs, which consist of a major currency and one
from an emerging economy, such as the South African rand (ZAR). These provide even greater volatility but the
emerging currency may not have the ability to remain stable in times of economic upheaval. Instead, minor pairs
are usually comprised of two currencies that show strong resilience; some of the most-traded examples include:
- EUR/GBP: Nicknamed 'Chunnel' as a nod to the Channel Tunnel connecting Great Britain with mainland
Europe. Major political developments, such as the Brexit vote in 2016 and Britain's subsequent exit from
the European Union, can have a significant impact.
- EUR/CHF: The franc was previously pegged to the euro between 2011 and 2015 and is treated as a
safe-haven option when stability is required. The average daily turnover of EUR/CHF as of April 2022 was
$68 billion.
- JPY/EUR: Nicknamed 'Yuppy' or 'Euppy', this is a minor currency pair that tops $100 billion in daily
trades. Its performance can be impacted by releases and updates from the Bank of Japan and the European
Central Bank.
- JPY/GBP: Accounts for only 0.3% of all forex trades so liquidity is relatively low compared to other
minor pairs and certainly when judged versus the major pairs. Nicknamed 'Guppy', like all pairs that
involve the yen, its performance can be affected by the natural disasters that sometimes strike
Japan.
The similarities between trading major and minor
currency pairs
All major and minor currency pairs have their own characteristics and idiosyncrasies. And while their
compositions vary, there are some overarching concepts about the ways in which they are traded that are common
across both.
- Leverage: You can trade major and minor currency pairs using leverage. This allows you to take up
larger positions for a relatively small amount of capital, which provides the opportunity to amplify
your profits. However, you are exposed for the full value of your position so your losses could also be
magnified if the market moves against you.
- Trade both ways: You can use derivative instruments like contracts for difference (CFDs) to trade
major and minor currency pairs. Trading via derivatives means speculating on the performance of the
asset, rather than taking ownership of it, so you can predict a pair's price to rise or fall with the
potential to profit in both bullish and bearish markets.
- News coverage: All major and minor currency pairs are linked to economies that have huge global
significance, so there is plenty of available information surrounding the factors that influence those
economies – such as news reports, financial updates, interest rates and more. These developments can all
help to inform your fundamental analysis.
The differences between major and minor currency
pairs
Whether you trade majors, minors or a combination of both will depend on a number of factors, such as your
trading objectives and your level of experience. To help you to work out which might be best suited to you and
your strategy, here are the key differences between major and minor currency pairs.
- Volatility: Major pairs typically offer less volatility, although significant and sudden movements can
still occur. But because they all involve the USD, traders tend to rely on the major pairs for stability
in times of uncertainty. The flip side to that is that minor pairs can provide the potential for greater
returns, if the volatile movement works in your favour.
- Liquidity: The major currency pairs are the most popular among traders and, as such, they offer high
liquidity. That makes it much easier to enter and exit positions, as there are always likely to be other
traders willing to buy or sell. Minor pairs still offer sufficient liquidity but not to the same extent
as majors.
- Spreads: Minor pairs often come with higher spreads than majors, because they are traded in lower
volumes. That will increase the cost of your trading, so it's important to factor that in when
calculating your potential profits and losses.
Major and minor currency pairs: Decide which is
right for you with Tradu
You might wish to add both major and minor currency pairs to your portfolio. Alternatively, you may choose
to trade one over the other. They each offer their own pros and cons, so it's important for you to decide which
approach you want to take, based on your objectives, your level of understanding of each type and your risk
appetite, among other factors.
You can access the forex market through our proprietary platform, which also offers live charts and a
suite of analytical tools to help you to implement your strategy. It takes only a few minutes to open an account
with Tradu, so get started trading major and minor currency pairs today.
How to trade forex
Currency Pairs
