Major Pairs

There are 180 currencies in the world, according to the United Nations. Theoretically, you can trade any one of those for another in the forex market (forex standing for "foreign exchange"). You can trade Polish zlotys for Pakistani rupees.

But, in reality, most currency transactions involve a handful of big currencies. Your dollars, euros, and pounds of the world.

Think of it like airline routes. Theoretically, you could fly from Greensboro to Boise, but not a lot of people make that trip. Therefore, that flight doesn't appear on the arrival/departure board a lot. However, NYC to Miami...happens dozens of times a day.

For currency trading, most of the activity is concentrated in a few types of transactions. These situations are known as the major pairs.

Each currency transaction involves two currencies, called a pair. If you turn U.S. dollars into euros, you're trading a dollar/euro pair. Meanwhile, most of the market consists of pairings involving one of the biggest currencies. And because the U.S. dollar acts as a kind of international currency, the major pairs generally involve the dollar trading with one of the other big currencies (euro, pound, yen), or the dollar with a second tier currency of one of the other Western countries (basically, Switzerland, Canada, Australia, or New Zealand).

The seven pairs that make up about 85% of the currency market are the Euro/U.S. Dollar, Pound/U.S. Dollar, U.S. Dollar/Yen, U.S. Dollar/Swiss Franc, Australian Dollar/U.S. Dollar, New Zealand Dollar/U.S. Dollar, and U.S. Dollar/Canadian Dollar.