In the forex market, currencies are traded in pairs, with one currency being bought and another being sold. The two currencies that make up a currency pair are known as the base currency and the quote currency.
The major currency pairs are the most actively traded and include the US dollar, the Euro, the Japanese yen, the British pound, and the Swiss franc. These currency pairs are considered the most liquid and are typically quoted with the lowest spreads (the difference between the bid and ask price).
The minor currency pairs, also known as cross-currency pairs, are pairs that do not include the US dollar. Examples of minor currency pairs include the Euro/British pound (EUR/GBP) and the Australian dollar/Japanese yen (AUD/JPY). These pairs are typically less liquid than the major pairs and may have wider spreads.
The exotic currency pairs are those that include a major currency and a currency from an emerging market. Examples of exotic pairs include the US dollar/Turkish lira (USD/TRY) and the Euro/South African rand (EUR/ZAR). These pairs are typically less liquid than the major and minor pairs and may have even wider spreads.
Traders may choose to trade different currency pairs depending on their risk tolerance, trading strategy, and market conditions. Major currency pairs are generally considered safer and more predictable, while minor and exotic pairs may be more volatile and offer greater potential for profit or loss.