Majors in forex
Family I · Instruments
Not to be confused with majors in forex.
Majors in forex are the currency pairs that account for the largest share of daily turnover in the foreign exchange market. They almost always include the US dollar on one side and the currency of a major developed economy on the other. Because they are traded in enormous volume, they generally have the tightest spreads and deepest liquidity of any currency instruments.[1]
Composition and conventions
The exact list of majors varies slightly by source, but the core group is widely treated as seven pairs: EUR/USD, USD/JPY, GBP/USD, USD/CHF, USD/CAD, AUD/USD, and NZD/USD. Some references also include USD/CNY or USD/SEK, while others exclude the antipodean pairs and count only the four or five most liquid. The convention is that the US dollar is the base currency in pairs with the yen, franc, and Canadian dollar, and the quote currency in pairs with the euro, pound, Australian dollar, and New Zealand dollar.
Majors are distinct from crosses, which do not contain the US dollar, and from exotic pairs, which pair a major currency with that of a smaller or emerging economy.
Liquidity and trading costs
Because majors are the most actively traded instruments, they usually carry the lowest transaction costs. Bid-ask spreads on majors are frequently quoted in fractions of a pip, though the exact spread depends on the broker, the account type, market conditions, and the time of day. Liquidity is deepest during the overlap of the London and New York sessions, and thinnest during the late New York session and around major holidays.
High liquidity reduces the likelihood that a single order will move the price, but it does not eliminate slippage or gap risk around scheduled economic releases and unscheduled news events.
Worked example: pip value in a major
A trader holds one standard lot (100,000 units) of EUR/USD. The pip size for this pair is 0.0001, and the account is denominated in US dollars.
For a pair where the US dollar is the base currency, such as USD/JPY, the pip value calculation differs because the pip size is 0.01 and the conversion is made from the quote currency back to the account currency.
Often confused with
- majors in forex
- The most actively traded currency pairs in the foreign exchange market, typically comprising the US dollar against the euro, Japanese yen, British pound, Swiss franc, Canadian dollar, Australian dollar and New Zealand dollar.
See also
References
- ↑ ISO 4217, the international standard that assigns each currency its three-letter code. The codes used in every pair quotation come from this standard, not from brokers.