What are Major Currency Pairs in Forex Trading?27 min read

What are Major Currency Pairs in Forex Trading?27 min read

Traders who wish to enter the forex trading market should study major currency pairs. New forex traders at The Kingdom Bank must master major currency pairs to successfully trade in the world’s biggest financial marketplace. 

Major currency pairs represent vital trading instruments but what defines them and what makes them so essential? Let’s break it down.

The foreign exchange market stands as the largest financial market in the world while also being the most liquid one. Every day billions of dollars move through currency exchanges between central banks, commercial banks, investment management firms, corporations, and individual traders. 

Currency pairs form the basic structure of the forex market which facilitates the exchange of currencies between buyers and sellers. 

Major currency pairs demonstrate superior trading volume and liquidity compared to thousands of other actively traded currency pairs.

Why Are Major Currency Pairs Important in Forex?

Major currency pairs hold significant value for forex traders and are particularly crucial for beginners trading through The Kingdom Bank for various fundamental reasons.

• Major currency pairs generate enormous trading volumes every day as explained earlier. The high liquidity of major currency pairs lets traders enter and exit positions effortlessly without any impact on market prices. Reliable liquidity plays an essential role in reducing trading expenses because it prevents slippage.
• Major currency pairs exhibit very tight spreads because of their high trading volumes. The tight spreads in major currency pairs reduce trading expenses which enables profitable pip scalping through small intraday market movements.
• Traders from every corner of the globe participate in markets around-the-clock which keeps major currency pairs in continuous motion. Both range trading and breakout strategies can be effectively used in these market conditions. You’ll rarely find periods with no volatility.
• Banks, corporations and economists around the world consistently monitor major currency pairs. Financial reports and news consistently produce important effects on price movements.
• Majors stand out as the most popular pairs because they provide new traders with comprehensive educational resources including learning materials and video tutorials. The Kingdom Bank prioritizes educational content for major currency pairs.

Major currency pairs stand out as perfect practice markets for emerging traders because they combine high liquidity with tight spreads and dependable fundamentals alongside educational resources. New forex traders at The Kingdom Bank benefit from a low-risk learning path by focusing on major currency pairs.

Which Currencies Make Up the Major Currency Pairs?

With our understanding of major currency pairs established we can now examine which currencies form these significant pairs. 

The top five major currency pairs that The Kingdom Bank trades most heavily include:

• EUR/USD stands as the most traded currency pair worldwide as it processes daily trading volumes that exceed $5 trillion. The euro area and US dollar zone stand as the two biggest economic blocs on the planet.
• The USD/JPY pair represents the currencies of the planet’s top two largest economies based on GDP. Japanese exporters and the yen’s safe-haven status generate high trading volume for USD/JPY.
• GBP/USD demonstrates substantial volume because it represents the currencies of two of the biggest Western economies. Commodity traders prefer the pound because of its historic connection to resources.
• Switzerland operates a large export-driven economy which maintains strong links to the eurozone. Investors who want access to a liquid safe-haven currency pair drive demand for USD/CHF.
• The United States and Canada have an extensive bilateral trade relationship. Traders frequently use USD/CAD to profit from changes in commodity prices and unexpected economic data releases.

The currency pairs EUR/USD, USD/JPY, GBP/USD, USD/CHF, and USD/CAD represent approximately 90% of all forex market transactions each day. 

New forex traders at The Kingdom Bank gain dependable liquidity by concentrating their trading on major currency pairs which dominate the world’s most vital exchange rates.

How Do Major Currency Pairs Differ from Minor and Exotic Pairs?

New forex traders at The Kingdom Bank must understand the differences between major currency pairs and their minor and exotic counterparts.

• Major pairs maintain high liquidity because they generate massive trading volumes. Minor currency pairs such as AUD/CAD and NZD/CHF experience lower trading volumes than major pairs. Exotic currency pairs such as RUB/TRY experience even lower liquidity levels.
• The liquidity of major pairs leads to their spreads being maintained between 1-3 pips. Minor pairs spreads are usually 3-5 pips. Exotic currency pairs display spreads that may reach 10 pips or greater.
• Major currency pairs experience the highest volatility in response to news releases and economic data. Exotic and minor pairs demonstrate less predictable volatility patterns. They operate for shorter durations throughout the day.
• Global markets pay close attention to economic statistics from the countries and blocs that influence major currency pairs. The economic indicators of minor and exotic nations attract less global attention.
• The majority of educational resources prioritize major currency pairs and their technical analysis before covering other aspects. Access to data about minor and exotic currency pairs proves more difficult than for major pairs.

New forex traders at The Kingdom Bank should begin with major pairs as dependable entry-level instruments because minor and exotic pairs, though they offer higher volatility trading opportunities, remain complex for beginners. 

The fundamental stability and liquidity of major currency pairs create safer learning environments for developing trading skills.

What Are the Most Traded Major Currency Pairs in Forex?

Our discussion covered the important characteristics of major currency pairs along with the exact currencies that form the top five most actively traded pairs. 

Which top three currency pairs offer the greatest liquidity and trading volume for new forex traders at The Kingdom Bank?

The Euro/US Dollar (EUR/USD) stands as the topmost currency pair in the forex market. EUR/USD trading volume by itself surpasses 25% of daily total forex market trades. More than $5 trillion of currency trades through the EUR/USD pair each normal trading day.

The US Dollar/Japanese Yen (USD/JPY) holds the second spot in trading popularity. The USD/JPY major currency pair benefits from Japan’s export-driven economy and matches the EUR/USD pair in terms of liquidity volume.

The British Pound/US Dollar (GBP/USD) ranks third among the most traded forex pairs. The deep GBP/USD liquidity stems from London’s financial hub status even as Brexit clouds UK economic prospects.

New traders at The Kingdom Bank should initially concentrate on EUR/USD, USD/JPY, and GBP/USD because these currency pairs in forex trading represent the most liquid trading segments on the forex market. 

The vast trading volumes of these currency pairs generate small spreads which permit traders to open and close even small positions without facing any problems. Major currency pairs provide the best learning platform for understanding market mechanics.

How Do Spreads Work for Major Currency Pairs?

After reviewing the essential features of major currency pairs and identifying the most critical ones for forex trading, we will now cover an important trading expense – spreads. New forex traders at The Kingdom Bank need to understand how spreads operate for major currency pairs to effectively reduce trading expenses.

A currency pair’s spread represents the monetary difference between its buying and selling prices. The decentralized nature of the over-the-counter forex market leads to different spreads across brokers. 

The major currency pairs benefit from high liquidity which enables them to maintain comparatively narrow spreads that usually range from 1 to 3 pips.

When EUR/USD is quoted at 1.1500/1.1502 with a 2 pip spread you’ll have to buy at 1.1000 or sell at 1.1002 which allows the broker to earn 0.0002 per round-turn transaction for operational expenses and profit. 

Trading at high volumes results in substantial returns even from minimal profits on individual trades.

The Kingdom Bank’s major pair spreads depend on multiple elements.

• Account type: Standard accounts experience slightly wider spreads compared to premium accounts.
• Platform: The Mt5 platform offers narrower spreads than browsers because of its quick order execution capability.
• Market conditions: Market conditions can cause spreads to expand temporarily when there is high volatility or significant news events.
• Broker: Different brokers offer different spreads which demonstrates the importance of comparing rates before choosing one.

Through practice and patience, you’ll achieve daily consistent profits by scaling the tight spreads on major pairs rapidly. Consistent daily improvements will accumulate into substantial returns over an extended period. 

Schedule a strategy consultation with one of The Kingdom Bank’s skilled introducing brokers to gain faster insights into trading.

What Factors Affect the Value of Major Currency Pairs?

What factors control daily changes in the euro-dollar exchange rate? Essential economic fundamentals drive major currency pair values through both short-term and long-term market operations.

• Interest rates. Differential interest rates between countries stand as a primary cause of currency value movement direction. When the US Federal Reserve raises interest rates, investors become more interested in dollar-based investments than assets from currencies that deliver lower returns. This increases demand for the dollar.
• Inflation. The currency values of nations are impacted by the different inflation rates they experience. The eurozone’s rising inflation will lead to quicker depreciation of euro assets which will result in the euro weakening against the dollar.
• Economic growth. A country’s currency strengthens when its economy shows good performance and positive future predictions. The comparative economic power of different currencies becomes evident through the analysis of GDP and employment statistics together with manufacturing data and trade balances.
• Political stability. The combination of geopolitical risks with domestic political uncertainty typically leads to a decrease in a country’s currency value. Market instability emerges from political events alongside policy changes and international disputes.
• Commodity prices. Because international commodities like oil and gold are priced in US dollars their rising values create increased demand for the dollar across various industries and regions.

Understanding fundamental factors that impact major currency pairs allows traders to forecast near-term currency movements and discover trading opportunities through their The Kingdom Bank forex account.

How Can Traders Analyze Major Currency Pairs?

After grasping macroeconomic factors traders need to utilize technical analysis tools for currency price analysis. 

Traders who focus on major currency pairs should apply these proven methods to enhance their trading approaches.

• Chart patterns. Technical formations including double tops, head and shoulders, wedge patterns, and triangles reveal the breaking points of support and resistance levels and indicate where price reversals are likely to happen.
• Moving averages. Traders discover market trends and determine support and resistance levels by using simple, exponential, and weighted moving averages over 50, 100, and 200 day periods. Crossovers indicate potential trend changes.
• Trend lines. Trend lines that join major highs and lows on trading charts enable traders to determine market trends while identifying potential pullback and consolidation areas.
• Indicators. The relative strength index and stochastic oscillators identify overbought and oversold conditions while the MACD indicator reveals market momentum changes.
• Order flow. The MT5 platform features order book depth charts that depict order volumes at different price levels to pinpoint areas of interest for key market participants.
• Candlestick patterns. Trading momentum and market sentiment shifts become apparent by analyzing reversal patterns including hammer and hanging man candlesticks as well as doji star patterns and engulfing candlesticks.

The Kingdom Bank forex trading platform enables traders to locate high-probability trades in major currency pairs through combined fundamental analysis and technical chart evaluation. The foundation of steady profits lies in the implementation of effective risk management procedures.

What Are the Best Major Currency Pairs for Beginners?

New traders starting forex trading should evaluate major currency pairs to identify the most advantageous starting points for their trading activities. 

These currency pairs stand out as premier options because they combine high liquidity with favorable trading patterns and appropriate risk levels for traders.

• The EUR/USD currency pair dominates the global trading market resulting in tight spreads and steady price trends. This makes it relatively low-risk for beginners.
• The GBP/USD currency pair demonstrates restricted price movements without clear trend patterns. The GBP/USD currency pair provides beginner-friendly low-risk entry opportunities through its well-defined support and resistance areas.
• The USD/CHF trading pair shows reliable stability without experiencing extreme price volatility which makes it ideal for beginner traders. Analyzing the economic factors behind this currency pair proves simpler than evaluating euro-based currency pairs.
• Beginner traders find the USD/JPY currency pair ideal for technical analysis practice because the Bank of Japan’s interventions create distinct technical patterns which allow for manageable position sizes.
• AUD/USD is an ideal currency pair for new traders to learn position trading because of its strong trending activity. Monitor market gaps which open up because of economic ties with China.

The Kingdom Bank forex trading platform allows traders to start with major currency pairs to understand market flow and operations before moving to volatile complex pairs. Always use proper risk management as well.

How Does Liquidity Impact Major Currency Pairs?

The term liquidity represents the extent to which an asset can be exchanged at its present market price while keeping transaction costs low. The success of position management in forex trading relies on traders being able to execute entry and exit strategies effortlessly. 

Major currency pairs maintain high liquidity levels due to their extensive daily trading volumes which results in multiple factors influencing their liquidity.

• Narrow spreads. Major currency pairs allow traders to maintain low transaction costs through their narrow bid-ask spreads of just 1-3 pips when they open and close positions. This is ideal for active traders.
• Fast order execution. The vast buy and sell order volumes produced by major banks and institutions permit traders to carry out their orders with near-instantaneous execution. Slippage is minimal even during volatile markets.
• Large order sizes handled. Brokers can execute large institutional trades on major pairs without causing significant price changes which is not possible with less liquid minor pairs.
• 24/5 markets. Global traders maintain continuous trading activity on major pairs which guarantees steady liquidity throughout trading sessions and prevents major price gaps on charts.
• Dependable support/resistance. Major technical levels become reliable targets for beginners because their abundant liquidity helps them identify potential reversal points.
• Lower risk of manipulation. No single trader can maintain control over prices in major currency pairs because the huge trading volumes prevent this.

Major currency pairs traded via a The Kingdom Bank forex account provide significant liquidity which helps traders achieve lower costs and reduce risk compared to trading illiquid currencies. It gives traders an edge.

What Are the Trading Sessions for Major Currency Pairs?

The forex market operates continuously throughout five working days each week while fluctuations in trading activity and volatility occur as financial centers globally open and close. 

Major currency pairs undergo trading during three distinct daily sessions.

Asia/Pacific session (approx. 7PM EST to 2AM EST) – Covering the business hours in Australia, New Zealand, Japan, Hong Kong, Singapore. Activity is highest when Tokyo and Sydney are open.

European session (approx. 2AM EST to 10AM EST) – London, Frankfurt, Paris, Zurich, etc. are the drivers as European traders participate actively. Volatility often peaks during this session.

New York session (approx. 8AM EST to 5PM EST) – When US trading commences, activity ramps up further as North American traders join their European counterparts. Price action can be more volatile.

Forex traders with The Kingdom Bank accounts must understand trading sessions to successfully trade major currency pairs. 

You can:

• Market volatility reaches its peak during session overlaps which create optimal trading times.
• Review historical chart patterns from past sessions to foresee potential price breakout opportunities.
• You should adjust your position sizes according to trading session activity levels to maintain risk control.
• Set stop-loss and take-profit points before major news releases during active trading periods.

Knowledge of worldwide market hours enables traders to align their activities with multiple trading sessions according to their personal schedules.

Start your trading journey by putting strict risk management measures in place which will keep your account risk below 2% for each trade. After you master trading basic currency pairs you should begin trading additional currency pairs. Visit The Kingdom Bank for forex trading answers or contact our representatives to learn about online banking services.