What are Minor Currency Pairs in Forex Trading?26 min read

What are Minor Currency Pairs in Forex Trading?26 min read

Global currency trading operates on an immense scale with daily volumes that exceed $6.6 trillion across numerous minor currency pairs. Traders who concentrate on major currency pairs such as EUR/USD, GBP/USD and USD/JPY must also examine minor currency pairs because the latter offer profitable trading possibilities. 

Trading strategies in forex markets require traders to understand minor currency pairs because these currencies have considerable influence.

The article provides a thorough examination of the minor currency pairs found in the forex market. The analysis compares major and minor currency pairs and defines their value for traders before discussing examples of common minor pairs alongside their market quotation systems and factors that impact their value. 

After reading this article you will understand the functionality of minor currency pairs and learn how to apply them in trading strategies using platforms like The Kingdom Bank.

Foreign exchange trading requires participants to purchase and sell various currencies from around the world. “Majors” refer to the primary currency pairs that are most traded which include pairs such as EUR/USD, USD/JPY, and GBP/USD. “Minor” currency pairs receive less trading activity but still present trading opportunities to investors. 

The article will provide an explanation of minor currency pairs along with their comparison of volatility to major pairs and effective trading strategies while offering beginner-friendly options and analysis tips.

How Do Minor Currency Pairs Differ from Major Currency Pairs?

Understanding minor currency pair differences from major currency pairs is necessary for successful trading of minor pairs. Major currency pairs achieve the highest trading volumes because they include one or more stable and highly liquid currencies from major economies. 

Over fifty percent of daily forex market trading volume is generated by the three major currency pairs EUR/USD, GBP/USD along with USD/JPY.

Minor currency pairs show less market liquidity and reduced trading volumes relative to major currency pairs. Minor currency pairs exclude the US dollar and match currencies from smaller countries. 

The currency pairs AUD/CAD, NZD/CHF, and GBP/JPY are presented as examples. Minor currency pairs maintain low trading volumes as they exclude major currencies including USD, EUR, and JPY in their pairings.

Trading liquidity levels distinguish major currency pairs from minor currency pairs because they exhibit distinct levels of market fluidity. 

Traders can easily enter and exit major currency positions because their trading activities create minimal exchange rate fluctuations. Price movements of minor currency pairs heavily depend on individual trades and small market events which can create significant impacts. 

When traders execute trades on minor currency pairs, they face elevated transaction costs due to their wider spreads.

Why Are Minor Currency Pairs Important in Forex Trading?

Traders question the effectiveness of investing in minor pairs because major currency pairs demonstrate high liquidity. 

Online forex trading requires traders to concentrate on minor currency pairs due to their multiple significant benefits.

• Increased profit potential: Minor currency pairs create significant short-term trading opportunities because they experience high levels of price movement. Minor currency pairs result in bigger payouts for each pip movement because their spreads exceed those of major pairs.
• Diversification: Investors who diversify their portfolios by including minor currency pairs achieve superior risk distribution compared to traders who exclusively focus on major currency pairs. When your position takes a hit with major currency pair movements you often discover positive trends emerging in minor currency pairs.
• News impact: Economic reports and announcements cause minor currency pairs to experience larger percentage fluctuations. Traders can capitalize on sharp reaction moves.
• Lower competition: Trading major currency pairs involves high trading volumes which make it difficult to identify proper entry and exit points. The low number of traders active in minor currency pairs creates better trading conditions.
• Unique opportunities: Minor currency pairs which track commodity prices demonstrate clear connections to industrial price movements. These pairs create their exchange rates based on concrete supply and demand factors beyond typical foreign exchange market dynamics.

You can enjoy these advantages by investing in minor currency pairs and minimize your reliance on any single currency market. 

Forex investors achieve optimal risk management by trading through major and minor currency pairs.

What Are Some Examples of Popular Minor Currency Pairs?

Understanding minor currency pair characteristics allows us to study particular examples that show regular trading opportunities.

• AUD/CAD: The trading behavior of the Australia-Canada dollar pair responds to fluctuations in oil prices alongside lumber and to changes in the prices of gold and base metals. The economic information from both countries linked by a single currency pair determines the direction of forex market trends.
• NZD/CAD: Natural resource price changes drive substantial fluctuations in the exchange rates between the New Zealand dollar and the Canadian dollar. Traders watch for cross-impacts on trade.
• GBP/CHF: Investor demand for Sterling and the Swiss Franc responds to market sentiment shifts affecting risk levels. The currency pair becomes profitable when central bank meetings generate market volatility that combines with political risk.
• EUR/GBP: The Euro features in this currency pair but remains insignificant because the UK economy operates at a smaller scale. The political transitions related to Brexit and shifts in economic power make market traders adjust their trading strategies.
• USD/SEK: The Dollar/Swedish Krona exchange rate movements depend on Swedish interest rate adjustments and the shifts in global risk appetite. Forex traders who monitor Riksbank changes tend to choose this currency pair.

The liquid minor currency pairs offer traders substantial opportunities through both swift technical shifts and fundamental trends that extend over time. 

The integration of these currency pairs into your trading portfolio can enhance your ability to profit from both trend-based movements and range-based market conditions.

How Are Minor Currency Pairs Quoted in Forex?

The importance of minor currency pairs will be addressed first before we explore their quotation methods within the forex market. 

You must understand price notation before you start making investments in currency pairs.

Minor currency pairs use the same “quote currency/base currency” quotation system that major currency pairs employ. The displayed figure indicates how much quote currency is required to buy one unit of base currency. 

For instance, in the AUD/CAD pair:

• Quote Currency: AUD (Australian Dollar)
• Base Currency: CAD (Canadian Dollar)

The exchange rate of 0.8900 indicates that each Canadian Dollar requires 0.89 Australian Dollars for purchase. Traders need fewer quote currency units to buy one unit of base currency when the base currency strengthens.

The Kingdom Bank platforms enable traders to establish trade volumes by selecting either standard lots which consist of 100,000 base currency units or micro-lots which consist of 10,000 units of base currency. 

Major currency pairs operate with pricing increments that go down to the fourth decimal place while minor cross-currency pairs function with pricing increments that extend only to the second decimal place.

Upon mastering this notation system, you will develop the ability to properly interpret bid/ask prices and pip value changes across various currency pairs. 

If you encounter difficulties with understanding the quotation system please contact us for further information.

What Factors Influence the Value of Minor Currency Pairs?

Investigating the economic factors that impact exchange rates represents the subsequent stage after you understand minor currency pairs and their market functions. 

Minor currencies undergo value adjustments in response to economic developments both domestically and worldwide similar to other currencies. 

Here are some of the top factors:

• Interest Rates: Market prices for minor currency pairs demonstrate major responses to central bank interest rate changes and anticipated policy developments. Higher rates strengthen a currency.
• Economic Data: The economy’s strength becomes evident through precise measurements of GDP growth and employment statistics. Surprises move markets.
• Commodity Prices: Currency pairs sensitive to commodities show performance shifts when oil and metal prices alongside agricultural product costs fluctuate. Hikes boost commodity currencies.
• Risk Sentiment: Global risk appetite influences safe-haven flows. When market uncertainty increases investors move towards the JPY and CHF as safe havens while commodity-linked currencies show declining performance.
• Government Policies: Domestic political risks like upcoming elections and major reform initiatives create financial market volatility. Populist shifts impact business confidence.
• Central Bank Rhetoric: The market bases its predictions of interest rate changes and currency planning on official economic projection reports.
• Geopolitics: Trade disagreements and international political disputes drive up the risk premiums in financial markets. International political disputes between specific nations lead to financial effects that spread into associated smaller market sectors.

Traders use fundamental drivers to predict significant changes in minor currency pairs and execute strategic trades via The Kingdom Bank. Fundamental analysis provides the essential framework required to develop effective long-term directional strategies.

The Kingdom Bank provides new traders access to its secure online forex trading platform which features low spreads for both major and minor currency pairs when setting up their account. 

New traders have access to The Kingdom Bank’s introductory account which requires no minimum deposit and includes free educational resources along with market analysis to support understanding of basic trading principles. The initiation process details are available on The Kingdom Bank. 

Are Minor Currency Pairs More Volatile Than Major Pairs?

Minor currency pairs usually show greater price movement compared to major currency pairs. The reason minor currency pairs exhibit higher volatility is that they experience reduced liquidity and trading volume because they receive less global market attention. 

Market prices in minor currency pairs move more easily because fewer market participants influence supply and demand.

The EUR/USD pair which ranks among the most liquid major currency pairs experiences an average intraday range of 50 pips. 

During the same trading period a minor currency pair such as NZD/CAD might move as much as 100 pips or higher. Increased volatility offers greater profit opportunities but also heightens the risk of losses when trades are not properly managed.

Volatility should be understood as neither positive nor negative because it represents greater price variation and uncertainty in market movements. 

A trader with strong risk management abilities and market analysis skills can benefit from the increased volatility found in minor pairs through the proper strategy. 

Leverage positions cautiously because wilder market swings require stops to be set further back. These currency pairs display volatility as an inherent quality which demands traders to modify their strategies.

How Can You Trade Minor Currency Pairs Effectively?

With our knowledge of minor currency pairs having increased volatility we can move forward to discuss effective trading tactics.

• Use tight stops. When markets show potential for bigger intraday fluctuations traders should maintain small position sizes and set stop losses nearer to entry prices. By implementing tighter stop losses, you reduce potential losses when market conditions turn unfavorable.
• Focus on liquid pairs. Not all minor pairs are created equal. Select currency pairs that maintain sufficient trading volume to prevent liquidity problems such as large bid-ask spreads. The most frequently traded minor currency pairs feature AUD, CAD, NZD, and Scandinavian crosses.
• Trade major news events. Minor pairs respond to both general market sentiment and specific economic news so traders should seek trading opportunities during major announcements from other countries which could affect cross rates.
• Pay attention to correlation. Some minors strongly correlate to majors. AUD currency pairs typically mimic the price trends seen in the AUD/USD exchange rate. Trading opportunities arise when you apply correlated price movements to align with the larger market trend.
• Use lower timeframes. Analyzing 1-hour or 30-minute charts reveals more trading opportunities during periods of increased volatility compared to daily charts. Look for patterns and react to breakouts.

Following these guidelines for risk management, pair selection, news trading, correlations analysis, chart timeframe selection and demo practice enables you to start making profits from minor currency pairs trading. 

We will now examine specific currency pairs that appear to present good trading opportunities.

What Are the Best Minor Currency Pairs for Beginners?

Beginners entering minor currency pairs should initially choose the most liquid and popular options. 

These pairs represent good trading options which allow beginners to develop their trading skills.

• AUD/CAD represents a high volume currency pair which shows strong links to commodity price movements. Often sees outsized moves that create opportunities.
• The AUD/NZD currency pair is called the “Trans-Tasman” because it connects the two main currencies of the South Pacific. This currency pair usually maintains a range-bound pattern but can produce explosive movements once it hits certain levels.
• The EUR/CHF currency pair represents the comparison between Europe’s monetary unit and the Swiss Franc which serves as a safe haven. The EUR/CHF currency pair demonstrates clear reactions to policy changes from the Eurozone and SNB.
• GBP/CHF – Britain’s pound vs the Franc. UK economic information combined with Brexit news generates intense market responses in GBP/CHF trading.
• NZD/USD provides access to minor currency trading with significant volatility against the US dollar.
• The USD/CAD pair represents two North American countries whose trading relationship is deeply influenced by their shared energy markets.

These currency pairs provide beginners with good trading environments in terms of liquidity and volatility along with key events while they also relate to major pairs which helps beginners learn. Begin practicing trading strategies with top minor pairs through a The Kingdom Bank forex trading account.

How Can You Analyze Minor Currency Pairs in Forex?

Having discussed minor pairs fundamentals and potential options to trade we can now focus on effective analysis methods.

• The prices of minor currency pairs often experience drastic changes due to significant scheduled news releases from their component nations. Circle key events.
• Many minors mirror movements in their most liquid counterpart (e.g. AUD pairs to AUD/USD). Leverage this relationship in analysis.
• In volatile markets classic patterns such as triangles and channels deliver dependable reversal signals on 1H timeframes and below whenever support or resistance lines break.
• The Kingdom Bank platforms provide essential order book insights that illustrate buy/sell order imbalances along with potential points where support and resistance levels may reverse.
• A minor currency that separates from its major counterparts might indicate an impending realignment due to arbitrage correction.
• Monitor political and economic news along with central bank developments in relevant countries to effectively predict market catalysts.

Analyzing minor currency pairs through technical analysis alongside fundamental data, order flow metrics, and inter-market insights helps traders identify high probability trading opportunities. 

Best Digital Bank to Open a Forex Account Online

Traders who wish to explore forex markets beyond standard major pairs can utilize minor currency pairs as a valuable alternative. Higher volatility in trades can lead to increased profit potential through effective risk management using appropriate strategies along with proper pair selection and analysis methods as well as consistent practice. 

The Kingdom Bank enables traders at every level to create forex accounts online and begin trading minor currency pairs from any location in a secure environment.

The Kingdom Bank delivers tight spreads and deep liquidity for all major and minor pairs along with advanced charting tools and market research resources while offering economic calendar integration, order flow analytics, and multi-asset trading capabilities through MT4 and MT5 platforms. 

Customers can quickly fund their accounts using multiple global payment options while The Kingdom Bank operates as a fully regulated and licensed banking entity.

Anyone who wants to improve their forex expertise through minor currency pair trading should begin with a The Kingdom Bank account today. A risk-free environment provides an ideal setting to develop strategies that take advantage of increased market volatility. 

Global traders and investors find The Kingdom Bank to be the ultimate digital bank for elevating their market performance. You have no risks but significant rewards when you begin your path through registration at The Kingdom Bank.