An Intro to the Minor Currency Pairs
There are many currencies traded in the forex market. Each currency is then paired along with another making a currency pair. Minors also referred to as Minor Pairs, Cross Currency Pairs, Minor Currency Pairs or simply “Crosses” are currencies that are not paired with the US Dollar but consist of the currencies of major economies such as Euro, the UK Pound and Yen. These three currencies are the most traded besides the US dollar.
Minor pairs have a smaller market share compared to major pairs. As a result, they can exhibit lower market liquidity. Lower liquidity in the market will tend to mean brokers have wider spreads on trade deals.
Fores Guides, Analysis, Opinion and live data
What are the Minor Pairs ?
Generally, the total minor pairs are fourteen, but this may vary depending on the broker. These include;
- EUR/GBP – Euro/British pound
- AUD/JPY – Australian dollar/Japanese yen
- CAD/JPY – Canadian dollar/Japanese yen
- EUR/JPY – Euro/Japanese yen
- GBP/JPY – British pound/Japanese yen
- EUR/CHF – Euro/Swiss franc
- GBP/CAD – British pound/Canadian dollar
- EUR/NZD – Euro/New Zealand dollar
- EUR/AUD – Euro/Australian dollar
- NZD/JPY – New Zealand dollar/Japanese yen
- EUR/CAD – Euro/Canadian dollar
- CHF/JPY – Swiss franc/Japanese yen
- GBP/CHF – British pound/Swiss franc
- GBP/AUD – British pound/Australian dollar
Pros and Cons of Trading the Minors
The relative lack of liquidity can greatly widen dealing spreads compared to those seen in the majors. Higher spreads are a primary disadvantage of trading the minors. Big gaps between bid and ask prices can increase transaction costs to the point where otherwise successful day trading and scalping strategies are no longer profitable.
Low liquidity can also make it difficult to acquire prices in fast markets, which can lead to large trading losses if you have leveraged, and end up on the wrong side of the market.
However, if you are not a short-term investor and have deep enough reserves to cope with substantial portfolio losses due to an occasional moment of poor liquidity, the primary advantage of trading the minors via one of the top forex brokers is that there are more trading instruments for reviewing high probability trading opportunities. Using such instruments can make volatility higher.
Also, minor currencies can show persistent and notable long term trends caused by capital flows into and out of the respective countries, depending on the prevailing interest rate differential and the current risk appetite of international investors.