What are the Major Pairs?
Major pairs are the four pairs of currencies that are most commonly traded in the foreign exchange markets.
How Do the Major Pairs Work?
The major pairs are Euro/U.S. Dollar (EUR/USD); U.S. Dollar/Japanese Yen (USD/JPY); U.S. Dollar/Swiss franc (USD/CHF); British Pound/U.S. Dollar (GBP/USD). There are about a dozen popular pairs that constitute the majority of forex trading, but these four are the biggest of the big.
Buying and selling currency always involves two currencies: the currency you’re paying with (that is, the currency you’re selling) and the currency you’re buying. Thus, currencies are traded in pairs. The base currency is the currency you’re selling, and the quote currency is the currency you’re buying.
For example, if you purchase a JPY/USD pair that is quoted at 1.40, then for every 1.40 U.S. dollars you sell, you get 1 Japanese yen. If you were selling the pair, you’d get 1.40 U.S. dollars for every Japanese yen you sold.
In the foreign exchange markets, prices go out four decimal places (like this: $1.4000). A change in the fourth decimal place—1/100th of 1% change in price—is called a pip. It actually stands for "percentage in point." (The exception, of course, is for USD/JPY pairs. They usually only go out two decimal points.)
Why Do the Major Pairs Matter?
The major pairs drive a lot of the activity in the currency markets because they are so popular.
Personalized Financial Plans for an Uncertain Market
In today’s uncertain market, investors are looking for answers to help them grow and protect their savings. So we partnered with Vanguard Advisers -- one of the most trusted names in finance -- to offer you a financial plan built to withstand a variety of market and economic conditions. A Vanguard advisor will craft your customized plan and then manage your savings, giving you more confidence to help you meet your goals. Click here to get started.
