How To Trade Forex Currency Pairs-Forex Factory Signals
What I consider to be the majors but I should point out that there is no definitive list of the major currency pairs some people say that there should be a seventh pair on the list which is New Zealand dollar against the US dollar and indeed as you’ll see when we look in trading to one twos app that this pair is listed there under the majors the reason I don’t include that pair in my list is because it’s traded volumes aren’t actually that high.
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The turnover in this Currency Pair is comparable to the US dollar against the Singapore dollar and less than the US dollar against the Mexican peso for example but as I say there’s no definitive version there’s never a right or wrong in this in fact some people will group the New Zealand dollar against the US dollar in a separate grouping with Aussie dollar against US dollar and dollar cad in a group that they called the commodity currency pairs at the end of the day it’s just a way of grouping them for the sake of convenience.
The reason that these three tend to be called the commodity currencies is that they are significant exporters and what they do export tends to rely on commodities to a significant degree if we look at the Australian dollar and Australia’s economy its major exports include iron ore coal briquettes gold and gas look at the Canadian dollar and Canada major exports are mineral fuels a major part of that is oil but also coal.
Then New Zealand dollar major exports are dairy and also meat and wood and if you want to learn more about the major currencies as well as the major currency pairs do check out that previous video in that video we mentioned that all the major currency pairs involve the US dollar what if we want to trade it Forex pair that involves two major currencies without involving the US dollar well these are what’s known as major currency crosses and are sometimes also called minor pairs or just – in pointed contrast to the majors.
So let’s take a closer look at this now here we are in trading two ones whose webapp looking at Euro Dollar one of the major pairs what I’m going to do is just go up to the top here and click in this magnifying glass icon box which is the search box and we get a list of all instruments on the left you can see though that we have stocks indices crypto currencies so we click on currencies then we have these three groupings major minor exotic if we click on major and those are the major currencies that we’ve just been talking about and you can see included in there is New Zealand dollar against US dollar if we click on minor that we’re going to see our currency crosses.
There’s a long list of currencies in there so let’s now talk about the most important of these and these are the three most traded major currency crosses or minor pairs whatever you want to call them the Euro against the pound euro against the Japanese yen and heats the Euro against the Swiss franc and we can see the importance of the euro as I traded currency in its involvement and all three of these most traded currency crosses here we have three sample quotes for those crosses and let’s start by looking at the Euro against the Japanese yen and this is quoted in a similar way to the way that dollar yen is quoted which we looked at in a previous video which is to say that one pip is naught point naught one one pip is on the second decimal place.
If this offer here was to increase from one seventeen point nine six three two one seventeen point nine seven three that would be an increase of one pip with euro Swiss and euro sterling one pip is as it is with so many other currency pairs it snorts point naught naught naught 1 so it’s on the fourth decimal place this offer here was to increase from 1.0 eight five eight four to one point zero eight five nine four that would be an increase of one pip and similarly with euro sterling as we said it’s the fourth decimal place and if that offer was to increase from point nine one two four eighty two point nine one two five eight that would be an increase of one pip and then for all three of these your quantity.
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if you’re placing a trade would be expressed in year is because euro is the first name currency for all three pairs so those are the three most traded major currency crosses but a cross can include any two currencies that doesn’t involve the US dollar let’s now take a closer look at this and explain where the term cross comes from a currency cross is any pair that does not involve the US dollar the term currency cross stems as with many aspects of the forex market from the conventions of the market and from the importance of the US dollar as a vehicle for foreign exchange transactions the dominance of the US dollar in this way.
Historically in the interbank market that if an institution state wants to convert for example British pounds in to Swiss francs then that conversion would actually comprise two legs of the first leg would be to convert the Sterling into US dollars first of all and then you would convert those US dollars in to Swiss francs so let’s run through some sample numbers these just single exchange rates from bids in office just for simplicity sake.
But let’s say cable is at one point two one two nine and dollar suasion or two point nine seven nine three if we multiply these two numbers together we arrive at one point one eight seven eight which is our rate for the Sterling Suisse now as I said you don’t need to worry about any of this with trading to one two because you can just deal this cross directly as a single pair but it is quite interesting to know and this derivation from $2.00 involving pairs is the reason why the cross tends to have a larger spread and that’s true across the forex market as a whole no matter who you’re dealing with.
When we looked in the web app earlier we saw that all the Forex pairs were divided up into three groupings we have the majors the minors and the exotic so let’s finish off now by looking at the exotics here we held back in trading to ones whose webapp in the instrument search and this time I’ve selected exotic currencies here and we can see there is a long list of currency pairs that are available to trend in here one of the more important ones is the dollar against the Mexican peso so let’s just talk about that one quickly so the exotic Forex pair we’re going to focus on is the US dollar against the Mexican peso as I said earlier groupings are often more for convenience to shake than anything else there isn’t really a strict definition of an exotic I myself would tend to lean towards saying an exotic Forex pair involved.
Emerging markets currency in this case that’s the Mexican peso the three-letter ISO code of which is M X M as you can see from this sample quote here the exchange rate is quite different to the ones we’ve looked at so far in terms of the size of the number of how many there are of the quote currency to the base currency but one pip here is the fourth decimal place which is actually the same as many currency pairs that we’ve looked at so if this offer quote was to go from nineteen point seven oh three seven to nineteen point seven oh three eight that’s an increase of one pip also note there are no fractional pips there’s no little number up here so there’s no fractional pips and you’ll also notice that the bid-offer spread it’s much wider than we’ve seen for the major currency pairs where those bid-offer spread are razor narrow now the reason i rate the US dollar against the Mexican peso are so important is down to the high volumes that are traded for this Forex pair in the forex market it sees more turnover than major crosses such as euro yen and has more than fifty percent of the volume of dollar Swiss which is a major currency pair.
