Top 5 Currency Pairs in Forex: A Guide to Trading the Most Popular Pairs
2/4/2025, 3:15:23 PM
Learn about the top five currency pairs, their characteristics and their behavior to optimize your trading. Join FundingPips and start trading without risking your own capital.
Top 5 Currency Pairs in Forex: A Guide to Trading the Most Popular Pairs
Forex trading is one of the most thrilling ways to make money, as it is challenging but highly rewarding. Forex is the world’s largest financial market, with a daily turnover above $7 trillion. One of the essential aspects of trading is understanding the currency pairs, their dynamics and ways to manage them. This guide will provide you with insights into trading the currency pairs effectively.
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What Are Currency Pairs in Forex?
A currency pair represents the exchange rate between two currencies. These pairs have two parts:
Base currency: The first currency is called base.
Quote currency: The second currency is called quote.
For example, in EURUSD, EUR is the base, and USD is a quote.
The price of a currency pair tells you how much quote currency you need to buy one unit of the base currency.
Forex traders make money by speculating on the price movements of currency pairs. If a trader thinks the base currency will be stronger than the quote currency, he will buy the pair. Contrarily, he will sell the pair if he thinks the quote currency will have more strength than the base currency.
Why Focus on the Top 5 Currency Pairs?
If you focus on the top currency pairs, you may have many advantages. For example:
High liquidity: Such top pairs have very high volume, which ensures tight spreads and fast execution.
Stability: Though all pairs fluctuate, these pairs remain stable, unlike exotic pairs.
Lower cost: The cost of trading these pairs is low due to tighter spreads. For example, if you trade EURUSD, you are charged less than a pip, while if you trade EURSGD, you are charged with 5 to 12 pips spread.
Deep insights: The top pairs have news, analysis, and reports. You can easily find the insights to help you pick the right direction.
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The Top 5 Currency Pairs in Forex
Here are the top five currency pairs:
EUR/USD (Euro/US Dollar)
The trading volume for EURUSD is the highest in the Forex market because it represents two major economic powers of the world, Europe and the US.
Since the volatility in EURUSD is mild, it is considered a safer pair to trade. Moreover, it has strong trends and is highly liquid, making it attractive for traders.
USD/JPY (US Dollar/Japanese Yen)
The USDJPY pair is the second most traded pair in the world. The Japanese yen is a major reserve currency, and the global risk sentiment highly influences it.
It is a highly volatile pair, especially during Asian sessions. The spreads are low most of the day.
GBP/USD (British Pound/US Dollar)
Known as “Cable”, it is one of the top currency pairs traded worldwide. The policies of the Bank of England and FOMC impact the pair. It experiences big swings during the London session.
The pair is ideal for traders who love to trade volatile markets. The spreads are low but slightly higher than USDJPY and EURUSD.
USD/CAD (US Dollar/Canadian Dollar)
It is another major currency pair which is very popular among traders. The Canadian dollar is strongly correlated with crude oil prices. If crude oil swings higher, it boosts CAD. Hence, USDCAD moves down.
The pair has a low spread and is mainly volatile in the New York session. It is impacted by Bank of Canada and FOMC policies.
AUD/USD (Australian Dollar/US Dollar)
The AUDUSD pair is traded frequently as it is considered a commodity pair. It strongly correlates positively with commodities like iron, copper, gold, etc.
It is a great pair to trade, as spreads are reasonable. Commodity trends are reflected in the price. Hence, a trader can capture commodity trends.
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Key Factors Influencing Major Currency Pairs
Do you want to trade the above-mentioned pairs effectively? Keep an eye on the following factors:
Economic indicators: Follow the latest news about GDP, inflation, interest rates, employment, etc., to know which currency is strong.
Geopolitics: Keep an eye on geopolitics and war-like situations. In such cases, safe haven currencies like USD and JPY rise while risk assets like GBP, AUD and EUR fall.
Charts: Follow the higher timeframe charts like 4-hour or daily to align yourself with a broader trend perspective.
Market sentiment: Stay updated with the market sentiment. A sentiment analysis of these pairs helps you find the strongest and the weakest currencies. Then, you can make a better trading decision.
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Final Thoughts
As a Forex trader, you should understand the characteristics of the top five currency pairs. They are highly liquid, have strong trends and have low trading costs. Using the right strategy, you can grab several trading opportunities with higher odds of success.
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