The process for trading on the foreign exchange (forex) market, is one that can be as complex as it is rewarding. In order to become an expert trader who continuously makes accurate trading decisions, and manages the level of risk as much as possible, you need to be familiar with how forex trading operates.
Not only this, but if you’re wondering how to learn more about forex trading, you would benefit greatly from exploring the most traded forex pairs in today’s market (at the time of writing).
Understanding the ins and outs of the market’s performance is crucial to your success in forex trading. And, a huge component of this, is knowing what is being traded the most.
In light of this, this article will reveal what currency pairs are, and take you through the most traded currency pairs in the forex market today.
What are forex currency pairs?
Traders worldwide, deal with the trading and exchanging of different assets in the financial markets, for the chance to make profits. What makes the forex market unique, is the fact that the assets being traded are currencies.
For example, the XM trading platform has clients from more than 196 countries around the world with more than 700 instruments for individuals to access. All these assets consist of currency pairs which make the Forex market stand out compared to other trading activities. The success stories behind many successful forex traders are evidence that this practice can be extremely rewarding for those brave enough to spread their wings and take the risk.
Exchange rates are a huge component of the global economy, since they are needed to allow foreign investment to be conducted. With each transaction, one currency is exchanged into another. The value of one currency against another is determined by the exchange rate.
These values are changing constantly across different currencies, and on the forex market, profits can be made from speculating the price movements of one currency against another.
For example, you might make a trade using the Euro (EUR) as the base currency (the one being exchanged), and the US Dollar (USD) as the quote currency (the one it is being measured against). This would form the pair EUR/USD.
Depending on your trade position, as the value of the EUR rises and falls against the USD, you will either make a profit or a loss.
What are the most traded forex pairs?
Now that you know how currency pairs work, let’s look at the top currency pairs being traded on the forex market now:
1. EUR/USD
The EUR/USD is the single most traded currency pair on the forex market, and encapsulates two of the biggest economies in the world.
With such large volumes of trades taking place each day, this pair has high liquidity, meaning you can make trades without having too big an impact on the market. It can be ideal for traders, since it’s a less volatile currency pair, and can have tighter spreads.
However, when it comes to any trade on the forex market, even highly liquid pairs can succumb to volatile movements under certain circumstances.
2. USD/JPY
The USD to the Japanese Yen (JPY) takes second to the EUR/USD, in the top currency pairs traded.
Similar to the above pair, the USD/JPY tends to have high liquidity, again, being a source of enticement to forex traders. This is because the JPY is the most traded currency in Asia, and the USD, the most traded in the world.
Also, during periods of global economic uncertainty, many traders view JPY as a ‘safe haven’. This is not to say, however, that factors (political and economic) in China and Korea don’t significantly impact the JPY’s value.
3. GBP/USD
The Great British Pound (GBP) to USD currency pair is the third most traded currency pair on the forex market.
The selling point for the GBP/USD, is the fact that it comprises of two of the largest economies in the West, which have very strong trade relations. Traders can start to notice one economy appearing to strengthen over the other, and make their trades accordingly.
There are various factors that affect the GBP/USD – especially following Britain’s exit from the European Union, as well as including interest rates, inflation, and political instability.
4. USD/CAD
The US Dollar to Canadian Dollar (CAD) currency pair is fourth place in the most traded forex pairs.
Canada’s main export is oil, and it supplies large amounts annually to several economies across the world. Therefore, the strong international trade flows create high liquidity for this pair, increasing its popularity on the forex market.
Also, with oil being priced in USD, Canada earns a substantial supply of dollars through oil export. As oil prices rise, it’s likely the CAD will rise in value against the USD.
5. AUD/USD
The Australian Dollar (AUD) to US Dollar, is the final currency pair that is traded most on the forex market.
There have in fact been times in history, where this was among the top three currency pairs being traded on forex. Australia is another large exporter of commodities like oil, gas, and coal, so it gains high liquidity from some strong international trade flows.
However, as with any pair, it’s not exempt from volatility, and still requires strategy and thorough planning for successful trading.
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Now that you know how currency pairs work, and what the most traded pairs on the forex market are (as of 2022), you can now begin to add these pairs to your own trading portfolio, and hopefully make some highly profitable returns.
