Understanding Forex Currency Pairs: Majors, Crosses, and Exotics

You may be guessing: “What are the most traded currency pairs in the Forex market ? What are Forex pairs? How do they work? Why do traders bet on them?”. Some currency pairs are traded more often than others in the Forex market. How do Forex pairs work, what are they, and why do traders bet on them? Read below.

Majors: The Market Leaders

“What are the most traded currency pairs on Forex?” — you ask. They are called Majors. You know these pairs are like big bosses in the world of currencies!

• EUR/USD
• GBP/USD
• USD/JPY
• USD/CHF
• USD/CAD
• AUD/USD
• NZD/USD

Major pairs correlate with the global strongest economies, and they are traded in high volumes. As a rule, higher volumes imply smaller spreads. All that means that the Majors are less affected by manipulation and, as a result, are more liquid. The immense volume traded with these pairs means they are less prone to manipulation and more liquid.

Note! All the Majors contain the USD, and they make up nearly 80% of trade volume in the FX market universe. It is because the Euro and the US Dollar represent the two largest economies in the world. And the EUR/USD pair tops the chart as the most traded pair, capturing nearly 24% of total Forex market volume, reflecting the economic stature of the Eurozone and the United States.

By the way, do you know that some currencies have exclusive nicknames in the Forex market? It’s a kind of professional jargon used by traders. For a better understanding:

Crosses: Diverse Opportunities Without the USD

Cross currency pairs, or Minors, do not include the US dollar. Instead, they are typically combinations of the three major non-USD currencies: EUR, JPY, and GBP. Sometimes this list also includes CAD, AUD and NZD. Pairs examples include:

These pairs are derived from the mathematical ‘cross’ of two Majors and are historically traded by first converting into USD. However, direct trades are now common, allowing for more straightforward transaction processes.

While not as voluminous as the Majors, Crosses are valued for their different price movement behaviors, which are less tied to USD movements, providing unique trading opportunities. As a rule, the crosses are more volatile than the majors. What’s volatility? Bro, it simply means that the currency value can change suddenly and often. Boom!

For example, selling the AUD/CHF pair means that you sell two Majors at the same time – AUD/USD with a proportionate amount of USD/CHF.

The most-traded crosses are based on the three major non-USD currencies: EUR, JPY, and GBP. But we want to provide you with a bit wider list:

The thing is, the crosses are not so attached to USD. So, while most markets will only base on pro-USD or anti-USD sentiments, you can find new ways to profit thanks to different price movement behaviors of the crosses.

Exotics: High Risk and Reward

The exotic pairs (or simply Exotics) are called this way just because they are rarely traded or spoken about. Exotic pairs combine a major currency with a currency from an emerging or smaller economy, such as:

• USD/SGD (U.S. Dollar/Singapore Dollar)
• EUR/TRY (Euro/Turkish Lira)
• USD/HKD (U.S. Dollar/Hong Kong Dollar)

Despite being less popular among traders, Exotics are not necessarily from weaker or less developed economies—as evidenced by high-value currencies like the Kuwaiti Dinar (KWD) and the Saudi Arabian Riyal (SAR). The main challenge with Exotics is their lower liquidity and higher volatility, which can lead to wider spreads and more substantial price fluctuations, making them more susceptible to economic and geopolitical events.

In fact, if a currency is called ‘exotic,’ it doesn’t mean it is poorly valued. It has more to do with its popularity among traders, not how developed a nation is.

Mention that not all of the existing currency pairs are traded in the Forex market. Otherwise, 180 currencies recognized by the United Nations had to be paired up.

Note: low liquidity makes exotic pairs more expensive to trade because they have wider bid-ask spreads. To ensure greater liquidity, go with the most popular exotic pairs.

To sum up, there are two main things you need to know before trading exotic pairs:

1. They are more volatile than the Majors.
2. They are less liquid than the Majors.

Trading and Strategy Considerations

Choosing which type of pair to trade — Majors, Crosses, or Exotics — largely depends on a trader’s risk tolerance, market knowledge, and trading style. New traders might favor the more stable and liquid Majors, while experienced traders might explore the potentially higher rewards from the volatility of Crosses and Exotics.

Regardless of the choice, traders should consider using tools like Forex Tester, a software that simulates the Forex market using historical data. This tool allows traders to develop and test their strategies without financial risk, applying learned insights to real-world trading for potentially better outcomes.

How to Backtest Multiple Currency Pairs Simultaneously

Simultaneous simulation of several trading pairs greatly helps save time for traders. The bad news is that not all programs call to test multiple pairs at the same time. The good news is that Forex Tester and Forex Tester Online (FTO) allow you to do this.

Let’s look at how to create multiple windows with different trading pairs and test them simultaneously.

1) First of all, get Forex Tester here.

2) Click “New Project” in the upper menu and set the rules.

3) Then, choose several currency pairs. Let’s choose three EUR pairs as an example: EUR-USD, EUR-JPY, EUR-GBP.

4) Set up the backtesting rules (time zone and so on).

5) Done! Now you have 3 tabs that you can work with simultaneously. They all run at the same time, so you don’t need to pause one window to switch to another.

You can test up to 10 different currency pairs at a time with Forex Tester. This means, that you can work 10x times faster. Just keep up!

Backtesting is a valuable tool that helps traders test their strategies without using real money. This practice guides smarter investment decisions by revealing how strategies might perform in different markets and identifying overlooked risks. This can reduce potential losses. Investors who backtest are better prepared for tough situations compared to those who don’t.

So…

What kind of pairs to trade and what to stay away from is up to your personal style. When getting experience, you will polish your trading choices and possibly even get some bruises.

Yes, this has been the ache for many traders. However, some of them thought: “Hey, no more bruises! Let’s create software that simulates the market using real historical data. So, we can get all the needed experience there without losing any money, and then apply all our knowledge and skills in the real market!” That’s when Forex Tester was created.

Want to dive into the full testing possibilities right away? Buy Forex Tester here.