Currency Pairs: Majors, Crosses and Exotics Explained

In a pair, the first currency is the base and the second is the quote. EUR/USD at 1.0850 means one euro costs 1.0850 dollars. Buying the pair means buying the base with the quote.

Three groups

Majors. The seven dollar pairs. Maximum liquidity, spreads from 0.0–1.5 pips, and moves that can be traced to data and central bank decisions.

Crosses. Pairs without the dollar. Spreads typically run one and a half to two times wider than majors because the price is derived through two dollar pairs. GBP/JPY and EUR/JPY are known for range — their daily move is often double EUR/USD's.

Exotics. A developed-market currency against an emerging one: USD/TRY, USD/ZAR, USD/MXN, EUR/PLN. Spreads reach tens of pips, swaps are large and negative, and price can move on political news that appears in no economic calendar.

The hidden cost of exotics

On USD/TRY, a 40-pip spread and a −$40 per lot daily swap are unremarkable. Holding for a week costs around $280 in rollover alone. Add the spread and the move has to be substantial just to break even.

Which is why exotics suit short directional ideas, not sitting and waiting.

Where to start

One pair, at least a month. EUR/USD across the European and US sessions. Once you know its typical daily range, its reaction to inflation data and its behaviour in the first hour of London without checking a calendar, add a second.

Read next

• Trading sessions
• Volatility and ATR
• Overnight swaps