Higher liquidity means a less volatile market where prices don’t radically fluctuate. Trading the USD/CAD currency pair is also known as trading the “loonie,” the name for the Canadian one-dollar coin, its namesake bird. The USD/CAD is one of the most liquid and actively traded pairs in the forex market.

What Are the Most Commonly Traded Currency Pairs?

Prices can fluctuate greatly, and due to the lower volume of trades, spreads can be wide. There also tends to be less historical data on these pairs, so those relying on technical analysis may find information harder to come by. Forex trading offers frequent trading opportunities, as currency prices are constantly fluctuating in value against each other. FX trading allows traders to speculate on all the major currency pairs. The only limit to which currency pairs can be traded are the pairs and quantity offered by the trading platform individual traders choose.

Read more examples of short selling currencies using spread bets and CFDs. Let’s use an example of spread betting to explain how currency pairs can be traded on, using the words buy/sell to represent long and short derivative positions. Other currencies (the Minors) are generally quoted against USD. Quotes against major currencies other than USD are referred to as currency crosses, or simply crosses. The most common crosses are EUR, JPY, and GBP crosses, but may be a major currency crossed with any other currency. The rates are almost universally derived, however, by taking the first currency’s rate against the USD and multiplying/dividing by the second currency’s rate against the USD.

Other Crosses

The value of each pip depends on your lot size and the specific currency that you are trading. Pips can also be useful for calculating the amount of leverage that a trader can use when foreign currency trading. An example of an exotic currency pair is the USD/SGD (U.S. dollar/Singapore dollar).

All currency pairs are categorized according to the volume that is traded on a daily basis for a pair. USD/CAD is the abbreviation for the U.S. dollar versus Canadian dollar (USD/CAD) currency pair. The quote for the USD/CAD currency pair defines how many Canadian dollars or quote currency are needed to purchase one U.S. dollar, the base currency. beaxy exchange review Exchange rates fluctuate based on which currency is stronger at certain times. These rates are supplied by global banks and updated in time periods of less than a second; the forex market is extremely fast-paced.

Currencies are traded in fixed contract sizes, specifically called lot sizes, or multiples thereof. Many retail trading firms also offer 10,000-unit (mini lot) trading accounts and a few even 1,000-unit (micro lot). For example, while historically Japanese yen would rank above Mexican peso, the quoting convention for these is now MXNJPY, i.e. The value of the USD/CAD pair is quoted as 1 U.S. dollar per X Canadian dollars. For example, if the pair is trading at 1.20 it means that it takes 1.2 Canadian dollars to buy 1 U.S. dollar, or alternatively that 1 CAD is worth $0.833 USD.

What Is a Currency Pair? Major, Minor, and Exotic Examples

The three main types of currency pairs are majors, minors (crosses) and exotics. The major currency pairs are often the most popular to trade, as they are the most liquid. Minor currency pairs are ones which leave out the United States dollar, and they are normally less liquid. Examples include the euro and Swiss franc (EUR/CHF), Canadian dollar and Japanese yen (CAD/JPY), or pound sterling and Australian dollar (GBP/AUD). Cross pairs can provide trading opportunities when the majors are presenting less favourable conditions. This is because forex trading is simultaneously buying one currency and selling another.

1. We’re also a community of traders that support each other on our daily trading journey.
2. The five BRICS countries represent about 41% of the world’s population, 32% of global economic output (adjusted for purchasing power), and 20% of global goods exports.
3. The whole market runs electronically, through a network of banks.
4. There are HUNDREDS of currency pairs in existence but not all can be traded in the FX market.
5. The major currency pairs are often the most popular to trade, as they are the most liquid.

It’s not unusual to see spreads that are two or three times bigger than that of EUR/USD or USD/JPY. Liquidity is used to describe the level of activity in the financial market. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.

When trading currencies, you’re selling one currency to buy another. Conversely, when trading commodities or stocks, you’re using cash to buy a unit of that commodity or a number of shares of a particular stock. Economic data relating to currency pairs, such as interest rates and economic growth or gross domestic product (GDP), affect the quebex prices of a trading pair. EUR/USD currency pair represents the euro versus the U.S. dollar and is different than most others because the dollar is the denominator or quote currency.

The currency pair is split into the ‘base’ currency, which is the first named currency; and the secondary currency, which is called the ‘quote’ currency. The price displayed shows how much of the quote currency is required to buy one unit of the base currency. In currency trading, traders often look for currency pairs with the highest pip values, as they are very useful for short-term strategies, such as day trading.

Major Currency Pairs

Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates have been invited to join as full members from January 2024. Regarding the FX market, there are four main CEE currencies to be aware of. So when paired with the U.S. dollar,  USD/SEK is read “dollar stockie”  and USD/NOK is read “dollar nockie”. This meant that these countries now had one currency, with the same monetary value, with the exception that each of these countries minted its own coins. For those of y’all who are really mesmerized by exotics, here’s a more comprehensive list.

The last decimal place to which a particular exchange rate is usually quoted is referred to as a pip (percentage in point). Some online forex providers typically quote no more than a fixed 1-point spread between the bid and offer on major forex pairs, and liquid cross rates in normal market conditions. The most traded currency pairs in the world are called the Majors. They involve the currencies euro, US dollar, Japanese yen, pound sterling, Australian dollar, Canadian dollar, and the Swiss franc. The final two currency pairs are known as commodity currencies because both Canada and Australia are rich in commodities and both countries are affected by their prices.