Comprehensive Analysis of Major Forex Currency Pairs: A Beginner's Guide to Trading Volume Rankings and Selection Tips

Forex Market Overview and Trading Mechanisms

According to the Bank for International Settlements (BIS) 2022 survey, the global daily foreign exchange trading volume has surpassed $7.5 trillion. The reason this massive market attracts numerous investors is primarily due to the relatively low trading threshold, allowing beginners to quickly get started and profit by learning basic knowledge. In Taiwan, forex trading has become the preferred tool for many beginners to practice investing.

The core concept of forex trading is simple: buy one currency and sell another simultaneously. Just like exchanging Taiwanese dollars for US dollars at a bank when traveling abroad, this is a form of forex transaction. Each trade involves a comparison of two different currencies’ values, forming a “Currency Pair.”

Understanding the Composition Logic of Currency Pairs

On trading platforms, currency pairs are usually presented in the format “Base Currency / Quote Currency.” For example, EUR/USD, where the euro is the base currency and the US dollar is the quote currency. If the exchange rate shows 1.3, it means 1.3 US dollars can exchange for 1 euro.

Similarly:

• TWD/JPY=4.53 indicates 4.53 Japanese yen can exchange for 1 New Taiwan dollar
• USD/JPY=139.25 indicates 139.25 Japanese yen can exchange for 1 US dollar

Forex Trading Volume Rankings and Currency Pair Classifications

According to BIS 2022 data, the top ten most traded currencies globally are: USD, EUR, JPY, GBP, CNY, AUD, CAD, CHF, HKD, SGD.

Forex market currency pairs are mainly divided into three categories:

Major Currency Pairs: The Most Liquid Options

Major currency pairs are combinations that include the US dollar and are the most frequently traded because the dollar is the highest-volume currency worldwide. These pairs feature high liquidity, tight spreads, and convenient trading.

The seven most popular major currency pairs include:

Cross Currency Pairs: Relatively Smaller Trading Volume

Cross currency pairs, also known as minor currency pairs, typically involve smaller trading volume currencies, such as KRW, SEK, TRY, etc. These pairs may be combinations of the US dollar with low-volume currencies or currencies outside of the US dollar pairings. Common cross currency pairs include EUR/CHF, GBP/JPY, CAD/JPY, etc.

Exotic Currency Pairs: High Risk and High Reward

Exotic currency pairs are combinations of a major currency and a developing country or emerging market currency, such as BRL, MXN, THB, etc. Compared to the previous two categories, exotic pairs have lower trading volume and liquidity, resulting in wider spreads and higher transaction costs. Additionally, political events or election results can cause sharp exchange rate fluctuations, making them riskier.

How Beginners Can Scientifically Choose Forex Currency Pairs

Faced with numerous currency pair options, beginners should filter based on the following key characteristics:

Prioritize Trading Major Currencies with High Volume

Major currencies generally come from countries with stable monetary policies, sound fiscal health, low inflation rates, and ample gold reserves. These currencies are more popular in the market, with larger trading volumes. Higher trading volume makes it easier to find counterparties and results in more stable price movements. Conversely, pairs with low trading volume are prone to sharp fluctuations, which are unfavorable for beginners.

Focus on Currency Pairs with Clear Trends

Beginners should look for currency pairs with obvious price trends, whether in a sustained upward (bullish) or downward (bearish) direction. Clear trend environments are easier to predict and can improve trading success rates. It is recommended to gradually learn fundamental analysis, paying attention to key indicators such as GDP growth rates, unemployment rates, inflation data, and central bank interest rate decisions, as these factors often determine the overall direction of a currency’s value.

Assess Currency Volatility

Volatility refers to the extent of a currency’s value fluctuations within a certain period, usually measured by annual standard deviation. Investors can use volatility to enter or exit positions during price rises or falls to profit from spreads. High volatility pairs carry higher risks but also offer greater potential returns. Beginners can observe technical indicators like Simple Moving Averages (SMA) or Bollinger Bands (BB) to evaluate volatility levels.

Five Recommended Beginner-Friendly Currency Pairs

1. EUR/USD

EUR/USD is the most traded currency pair globally, accounting for 22.7% of forex market volume. Its large trading volume means many buyers and sellers, with very tight spreads and relatively moderate volatility, making it suitable for traders of all levels.

As a relatively stable currency, the euro and the US dollar are the world’s benchmark currencies. Price movements are easier to predict, and EUR/USD is rarely affected by sudden events or risk sentiment swings, making it a safe and reliable entry point.

2. USD/JPY

USD/JPY is the second most traded currency pair globally, accounting for 13.5% of total trading volume. It offers high liquidity, low volatility, and tight spreads. USD/JPY often exhibits clear and persistent trend changes, making it easier to identify entry and exit points, especially beneficial for long-term traders.

Due to the close economic ties between Japan and the US, USD/JPY’s movements are sensitive to economic data and major events from both countries. Beginners can improve trading decisions by tracking economic calendars.

3. AUD/USD

AUD/USD accounts for 5.4% of forex trading volume. The Australian dollar and the US dollar are both positively correlated with gold prices, as Australia is one of the world’s largest gold producers. When gold prices rise, AUD/USD tends to rise as well, making price movements more predictable and less prone to sudden shocks. However, monitoring economic news from both countries remains essential to maximize trading opportunities.

4. GBP/USD

GBP/USD’s trading volume accounts for about 12% of the global forex market. The British pound and the US dollar represent two major economies—UK and US—and their exchange rate is influenced by macroeconomic indicators, political events, and other factors, forming a relatively stable trading mechanism.

5. USD/CHF

USD/CHF is the fifth-largest forex pair globally, accounting for about 5% of trading volume. Switzerland, as a global financial hub, has a strong financial system and stable economy. The Swiss franc is viewed as a safe-haven currency. During global economic fluctuations or market risk aversion, investors tend to move funds into Swiss francs for protection. Therefore, USD/CHF is a common choice for hedging and safe-haven trading.

The Three Main Types of Forex Trading

Spot Forex Trading

Spot trading involves directly buying and selling currencies in the market, such as exchanging foreign currency at a bank. Unless for travel or residence needs, most investment-oriented transactions do not choose spot trading because of its lower efficiency, limited tradable currencies, and the potential for profit margins to be compressed by exchange costs.

Forex Futures Trading

Forex futures incorporate leverage and margin systems, where both parties agree to exchange a specified amount of currency at a predetermined price on a future date. Investors only need sufficient margin to participate. Some use futures to hedge against future currency depreciation. However, margin requirements are usually high, making it less suitable for small-scale investors.

Forex Contracts for Difference (CFD)

CFD is the most common form of forex trading. Compared to spot and futures, CFDs offer more flexible leverage ratios, lower entry barriers, and a richer set of trading tools, making them the preferred choice for most modern investors.

Although the forex market offers many opportunities, for beginners, starting with major currency pairs with high trading volume is the best way to learn and grow steadily. Mastering the classification logic of currency pairs, understanding fundamental factors, and observing technical signals—these combined skills will greatly enhance your success rate in forex trading.