UNDERSTANDING CURRENCY PAIRS

Understanding the Price

Let’s say:

GBP/USD = 1.3500

This means one British Pound is worth approximately 1.35 US Dollars.

If GBP/USD rises, it means the Pound is becoming stronger relative to the Dollar, or the Dollar is weakening relative to the Pound.

If GBP/USD falls, it means the Pound is weakening relative to the Dollar, or the Dollar is strengthening relative to the Pound.

Remember:

A currency pair is always relative.

There is no currency moving completely independently inside a pair.

Major, Minor and Exotic Pairs

Major Pairs

Examples:

EUR/USD

GBP/USD

USD/JPY

Minor Pairs

These generally involve major currencies but don’t contain USD.

Examples:

EUR/GBP

GBP/JPY

EUR/AUD

Exotic Pairs

These usually combine a major currency with a less-traded currency.

Examples include:

USD/TRY

USD/ZAR

Exotic pairs can have different liquidity and spread characteristics.

Why Beginners Often Start With Major Pairs

Major pairs tend to have high levels of trading activity.

This can mean:

• More liquidity
• Generally tighter spreads
• Large amounts of market information
• Lots of educational resources

However, this doesn’t mean major pairs are automatically safer.

Every market carries risk.

Key Takeaways

• Currency pairs show one currency relative to another.
• Major pairs generally have high liquidity.
• Minor pairs don’t contain USD.
• Exotic pairs involve less-traded currencies.