Majors, crosses and exotics: how the groups differ

A broker’s instrument list usually holds more than 50 currency pairs. They are not equivalent, and
knowing which group a pair belongs to helps you avoid the expensive ones from the start.

1. Majors

Pairs with USD on one side, against the currency of a large economy:

• EUR/USD, GBP/USD,
  USD/JPY, USD/CHF
• AUD/USD, USD/CAD, NZD/USD

Characteristics: the highest liquidity, the tightest spreads, the most news coverage,
and more predictable behaviour. This is where beginners should start, and where most of the market’s volume
sits.

2. Crosses

Pairs with no USD, combining two major currencies:

• EUR/GBP, EUR/JPY, GBP/JPY, EUR/AUD, AUD/JPY

Characteristics: spreads about 1.5–3 times wider than the majors, and usually larger
moves. GBP/JPY is famous for its daily range — attractive, but it demands proportionally smaller size.

A point few notice: a cross is priced indirectly through the dollar, so its spread is usually the sum of
the two underlying pairs’ spreads.

3. Minors and exotics

A major currency against a smaller or emerging-market one:

• USD/TRY, USD/ZAR, USD/MXN, EUR/PLN, USD/SGD

Characteristics: very wide spreads, sometimes 20–80 pips; thin liquidity; sudden price
jumps; and swap that is heavily negative or heavily positive because of the large rate differential.

This group does not suit beginners. One trade can cost as much as ten on a major.

4. What to choose, by stage

• Starting out: pick one major, usually EUR/USD, and learn its rhythm
  thoroughly.
• Once consistent: add one or two more, preferring pairs that are not
  highly correlated with the first.
• Crosses: only once your sizing is under control and you accept the higher cost in
  exchange for the range.
• Exotics: only with a specific reason and after costing them in dollars — not because
  they “move a lot”.

5. The correlation trap

Opening EUR/USD, GBP/USD and AUD/USD in the same direction sounds like diversification. In reality all
three are short dollars — you have placed one bet at triple size. It is a common reason
accounts run out of margin even though every individual
trade had a carefully placed stop loss.

This article is for information only and is not investment advice. Conditions and fee levels are published by the brokers and can change at any time — check with the broker you actually use. Leveraged forex and CFD trading carries a high level of risk and can cost you your entire deposit.