Currency Pairs Explained: Majors, Minors & Exotics
Why currencies come in pairs
In forex you never simply buy “the euro”; you buy it against something else, because a currency’s value only makes sense when it is measured in another currency. That is why every quote is a pair, such as EUR/USD or GBP/JPY, and why every trade means buying one currency while selling another. If the market itself is new to you, start with what forex trading is.
Base and quote currency
The first currency in a pair is the base; the second is the quote. The price tells you how much of the quote currency it costs to buy one unit of the base. If EUR/USD is 1.0850, one euro costs 1.0850 US dollars. If USD/JPY is 150.00, one dollar costs 150 yen.
Buying a pair means buying the base and selling the quote, so you want the price to rise. Selling the pair is the reverse. Your profit or loss is counted in the quote currency — dollars on EUR/USD, yen on USD/JPY — and your broker converts it into your account currency.
You will see two prices: the bid, where you can sell, and the ask, where you can buy. The gap between them is the spread — your main trading cost. Most pairs are quoted to four decimal places, where a pip is 0.0001; pairs with the yen as the quote currency use two, where a pip is 0.01. Many platforms add an extra digit for fractions of a pip. There is more in spreads and pips explained.
Majors, minors and exotics
Pairs are loosely grouped by how heavily they are traded.
- Majors — the US dollar against another leading currency: EUR/USD, USD/JPY, GBP/USD, USD/CHF, AUD/USD, USD/CAD and NZD/USD. The dollar is on one side of nearly 90% of all forex trades, according to the 2022 BIS survey, so these pairs have the deepest liquidity and usually the tightest spreads.
- Minors, or crosses — two major currencies without the dollar, such as EUR/GBP, EUR/JPY, GBP/JPY, AUD/NZD and EUR/CHF. They are actively traded, but spreads are typically a little wider, and some, like GBP/JPY, can move sharply.
- Exotics — a major currency against one from a smaller or emerging economy, such as USD/TRY, USD/ZAR, USD/MXN or EUR/PLN. Fewer participants trade them, so spreads are wider, gaps are more common and overnight holding costs can be high.
These labels are convention, and brokers draw the lines slightly differently.
Nicknames you will hear
Traders and commentators often use shorthand:
- Cable — GBP/USD, after the transatlantic telegraph cable that once carried the rate between London and New York.
- Fibre — EUR/USD.
- Swissy — USD/CHF.
- Loonie — USD/CAD, after the loon pictured on Canada’s one-dollar coin.
- Aussie and Kiwi — AUD/USD and NZD/USD.
- Ninja — USD/JPY, and Guppy — GBP/JPY.
Liquidity and spreads: why they matter
Liquidity is simply how easily you can buy or sell without pushing the price. The more buyers and sellers there are, the narrower the spread and the more reliably your orders fill at the price you expect. As a rough guide, a major such as EUR/USD may have a spread of a pip or less, a cross a few pips and an exotic tens of pips.
On one standard lot of EUR/USD (100,000 units) a pip is worth about $10, so a 1-pip spread costs you about $10 on the trade. A 3-pip spread at the same pip value costs about $30 — before the market has moved at all. Spreads also widen on every pair around major news, at the daily rollover (5pm New York time) and in quiet hours. You can compare costs with the spread cost calculator and watch a major in real time on the live EUR/USD rate page.
Which pairs suit beginners
Most newcomers are better served by one or two majors. EUR/USD is the most traded pair in the world, costs are low, and news and analysis are easy to find. GBP/USD and USD/JPY are also popular, though Cable tends to be livelier. Trade them when their home markets are open — our guide to forex trading sessions explains the timings.
- Learn each pair’s rhythm: when it is active, how far it usually travels in a day and which news moves it.
- Leave exotics and volatile crosses until you have experience and a tested plan.
- Remember that pairs overlap: buying both EUR/USD and GBP/USD is largely one bet against the dollar, which doubles your risk rather than spreading it.
Forex and CFDs are leveraged and carry a high risk of loss. Practise on a demo account first and only risk money you can afford to lose.
FAQ
What is the difference between the base and quote currency?
The base is the first currency in a pair and the quote is the second. The price shows how much of the quote currency buys one unit of the base. With EUR/USD at 1.0850, one euro costs 1.0850 US dollars, and your profit or loss is counted in dollars.
Which currency pair is best for beginners?
There is no single best pair, but most beginners start with a major such as EUR/USD. It is the most heavily traded pair, spreads are usually tight, and news and analysis are easy to find. Focusing on one or two majors helps you learn how a pair behaves before branching out.
Why do exotic pairs have wider spreads?
Fewer banks and traders deal in exotic currencies, so there is less liquidity and more risk for whoever quotes the price. Dealers cover that risk by widening the gap between the buy and sell price. Exotics can also gap sharply on local political or economic news, which adds to the cost.