The enormous Forex marketplace allows retail traders and institutions to profit from the exchange. All accepted currencies are bought and sold in pairs — combinations of a “base” currency with a “counter” or “quote” currency. While the most conventional types are termed Forex majors, selections of less liquid pairs are regarded as “minors”. Here are the fundamentals of the latter.
Minor Currency in Forex Trading
Minor Currency in Forex Trading is most commonly, the combinations with EUR, GBP, CAD, AUD, NZD, CHF and the Yen, Excluding the US Dollar. This is because they are the other three most traded currencies. However, the definition varies between brokers, so make sure you clarify the term.
Generally, these combinations have only a modest share of the market. Unlike EUR/USD, they are less liquid and therefore offer fewer opportunities for profit. Their spreads are usually wider. However, the border between majors and minors is quite vague.
For instance, pairs like AUD/USD are fairly liquid. Some traders view them as majors, some as minors, and some as “Commodity currencies”. On the other hand, EUR/JPY or EUR/GBP, which are also quite liquid, but do not involve the USD, are not always included in the ranks of minors.
Keynote: Forex Minor Currency Pairs are the pair which are most commonly traded excluding the US Dollar. They are the: GBP (British Pound), EUR (Euro), JPY (Japanese Yen), CAD (Canadian dollar), CHF (Swiss Franc), AUD (Australian dollar)
NZD (New Zealand dollar). They are also refered to as Cross-currency pairs.
Trading the Minor Forex Pairs
Not all brokers allow trading of this category. Such reluctance is justified by lower profitability for scalpers and certain types of traders.
Many of them choose to focus on commodity currencies and majors, whose spreads are tighter and volatility higher. Before delving into the practice of minor trading, examine your strategy to see if it is suitable for the less liquid pairs.
List of Forex Minors
Most often, 14 pairs fit into the class of FX minors. Check the exact classification with your intermediary. Here is the general list:
The Euro as a Base currency :
EUR/AUD — against the Australian dollar
EUR/CAD — against the Canadian dollar
EUR/CHF — against the Swiss franc
EUR/GBP — against the British pound
EUR/NZD — against the New Zealand dollar
EUR/JPY — against the Japanese yen
The British Pound as a Base currency
GBP/CHF — against the Swiss franc
GBP/CAD — against the Canadian dollar
GBP/AUD — against the Australian dollar
GBP/JPY — against the Japanese yen
Other Currencies as a base currency:
CHF/JPY — Swiss franc against the Japanese yen
AUD/JPY — Australian dollar against the Japanese yen
CAD/JPY — Canadian dollar against the Japanese yen
NZD/JPY — New Zealand dollar against the Japanese yen
Nicknames of the Major & Minor Trading Pairs
USD (U.S. Dollar): “Greenback” or “Buck”.
GBP (British Pound): Sterling
CHF (Swiss Franc): “Swissy”
CAD (Canadian Dollar): “Loonie”
AUD (Australian Dollar): “Aussie”
NZD (New Zealand Dollar): “Kiwi”
Trading Minor Pairs
The moderate liquidity causes broader spreads in comparison with the conventional pairs. For example, day trading and scalping may not be compatible with wider spreads.
On the other hand, those specializing in longer trends may find minors convenient.
Illiquid markets are associated with order slippage and less profitability for short-term traders overall. On the other hand, there may be considerable and consistent long-term trends determined by capital flowing into and out of the respective countries.
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Kathleen Brooks is UK and EMEA research director and based in London. She uses both fundamental and technical methods in her analysis. Her philosophy of market analysis is to break things down to their most simple parts and build from there.
Kathleen has regularly contributed to Yahoo Finance, Reuters and often quoted in international publications such as Financial Times and the Wall Street Journal.