In the forex market, you deal with two currencies at a time. For example, when you’re selling US dollars, you need to know what you’re selling it for. Let’s say you’re selling dollars and getting euros in return. In that case, you’re trading the USD/EUR currency pair. In forex, you’ll be talking about currency pairs a lot.
Whether you’re trading JPY/EUR (Japanese yen and euro) or ZAR/MXN (South African rand and Mexican peso), currency pairs will dominate the discussion at every turn. There are three types of currency pairs: major, minor and exotic.
Currency pairs of the major economies
Major currency pairs are based on a list of popular currencies that are paired with the USD. The basket of major currencies consists of 7 pairs only. These currency pairs account for most of the turnover of Forex market. For instance, EURUSD pair alone accounts for about 30% of the trading volume.
Currency pairs that don’t include the US dollar
Minor currency pairs that are not associated with USD are called minor currencies or cross currencies. Cross rates can be easily calculated using the main pairs. For example, to calculate the EURGBP rate simply delete USD in EURUSD and GBP USD rates.
Currency pairs of the developing countries
Exotic currency pairs represent developing countries as well as several developed European countries and are traded less frequently. The group of exotic currencies was formed by the means of the International Monetary Fund. Exotic currency pairs are usually highly volatile and are lacking liquidity. Note that this results in a higher cost of trading and abnormal price movements.
The WCU – World Currency Unit
The WCU is a global composite currency derivative covering the world’s top 20 economies, representing the vast majority of global production. Weighted elegantly and logically based on International Monetary Fund GDP figures, the WCU's low volatility. A natural currency stabilisation, hedging against exchange rate volatility and individual currency purchasing power