Top 10 most traded currency pairs

Trillions of dollars are traded daily in the forex market. This makes it the largest and most active financial market across the globe. The forex market is open 24 hours a day, 5 days a week. It is used by global traders to speculate on the price movement of currency pairs. The exchange rate between the world’s currencies is set by the forex market. Becoming a successful forex trader requires a good understanding of the market and the traded currencies. In this article, we’ll be looking at 10 of the most traded currency pairs.

Actively traded forex currencies

There are 180 currencies in use worldwide but not all are actively traded, only those that are economically and politically stable and have liquidity. Forex trades are typically executed in the:

• United States dollars (US$)
• Euro (€)
• British pound (GBP)
• Japanese yen (JPY)

The US$ is considered the most prevalent currency in forex markets (and the most traded currency in the world). The euro is the 2  most traded currency worldwide. Out of the Asian currencies, the JPY is the most active. The 4    most traded currency in the forex market is the GBP.

Other popular currencies traded are the Canadian dollar (CAD), Swiss franc (CHF), Australian dollar (AUD), and New Zealand dollar (NZD).

Currency pairs

Forex currencies are traded in pairs. A currency pair quotes (compares) the value of one currency vs another, i.e., the exchange rate.  Using EUR/USD as an example of a currency pair, the first currency on the left (EUR) is called the base currency. The currency listed next to it on the right (USD) is known as the quote currency. A trader will use a currency pair to determine the quote currency needed to buy a unit of the base currency. Currency pairs come with a bid and an asking price. The bid price is the sum the trader is willing to sell the base currency for. The asking price is the lowest price at which a base currency can be purchased.

Top 10 most traded currency pairs

Ten of the most actively traded currency pairs are:

• EUR/USD (Euro/US dollar)
• USD/JPY (US dollar/Japanese yen)
• GBP/USD (British pound/US dollar)
• AUD/USD (Australian dollar/US dollar)
• USD/CAD (US dollar/Canadian dollar)
• EUR/GBP (euro/British pound)
• USD/CHF (US dollar/Swiss franc)
• NZD/USD (New Zealand dollar/US dollar)
• USD/KRW (US dollar/South Korean won)
• USD/HKD (US dollar/Hong Kong dollar)

What are the major pairs?

The four most actively traded currency pairs in the forex market (and globally) are called the major pairs. They are the USD/JPY, EUR/USD, USD/CHF，並且 GBP/USD. The pair with some of the largest daily volume (20% of all forex transactions in 2021) is the EUR/USD. 

The USD/CAD, AUD/USD 和 NZD/USD are referred to as commodity pairs. These currencies are usually from countries that produce and export commodities and are sensitive to changes in commodity prices.   

What is the appeal in trading the major pairs?

There are several reasons traders trade the major pairs:

1. Major pairs typically have more volume and smaller spreads between bid and ask prices, in comparison to exotic pairs.
2. High volume means trades can be opened and exited easily.
3. High volume also means traders may be more eager to buy or sell at a particular time, with a low risk of slippage. Traders must however still be cautious as large slippage can occur in major pairs, albeit less than with exotic pairs.

Exotic currency pairs

Exotic currency pairs typically comprise a major currency with one other from a developing or emerging market. They are usually traded at low volume and lack liquidity. Exotic currencies are also considered highly volatile and sensitive to their country’s economic fluctuations. Examples of exotic currencies include the Thai Baht, Turkish lira, Iraqi dinar, South African Rand, Mexican peso, etc. Exotic currency pairs look something like this:

• EUR/TRY (Euro/Turkish lira)
• USD/ZAR (US Dollar/South Africa Rand)
• EUR/MXN (Euro/Mexican peso)
• GBP/PLN (British Pound/Polish Zloty)
• USD/HUF (US dollar/Hungarian forint)
• EUR/RON (Euro/Romanian Leu)
• TRY/JPY (Turkish lira/Japanese yen)

Forex market price fluctuations

The 外汇市场 is largely impacted by macroeconomic and geopolitical factors, in that they are what ultimately drive currency value. Factors include:

• Inflation - (通货膨胀)
• Political instability
• Unemployment rates
• Global trade
• Environmental disasters
• International capital markets
• Stock, bond, and commodity markets

This makes it very important for forex traders to follow world news and its impact on the performance of their trades.   

When currency prices decline, the market is said to be in a bear state. In this state, which can last any length of time, investors tend to exhibit risk-averse behaviours. A bull market is typically characterised by rising currency prices. Investor sentiment is usually more optimistic, and traders tend to have a more positive perception of the forex market.

Contracts for Difference (CFDs)

Currency pairs can be traded using CFDs. A CFD is a contract between two parties, for example, a forex trader and a CFD forex broker, to exchange the difference between an asset’s opening and closing price. Since CFDs are derivative products, the trader is not required to take ownership of the asset. The CFD forex brokers make their money through spreads (the difference between the ask and the bid price).

CFDs typically provide higher leverage than traditional trading but leverage is very volatile and comes with very high risk. The amount of leverage a forex trader opts for is usually based on their risk tolerance and how much money they’re willing to lose. If not handled properly, leverage can see a trader losing large sums of money.

Starting out as a forex trader

If you’re new to forex, take the time to learn as much as you can about the forex market and how to trade. Understand everything you can about currency pairs, currency trends, and what impacts currency prices. Discover your trading style that best fits your trading needs and build a trading plan and strategy to achieve your trading goals.

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This information is not considered investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced or hyperlinked, in this communication.