How to Choose Currency Pairs in Overseas FX: Beginners Start With 1 or 2 Majors
When starting overseas FX, are you unsure which of the dozens of currency pairs to choose?
In short, a sensible way for beginners to start is with one or two highly liquid major pairs, such as EURUSD and USDJPY.
This article covers the pair categories, how they fit spreads and trading hours, differences in the value of 1 pip, correlation risk, and how pairs relate to cashback.
In short: beginners should start with 1 or 2 highly liquid majors
- Major pairs have high trading volume, so spreads tend to be narrow
- At first, narrow down to pairs such as EURUSD and USDJPY and learn how they move
- The value of 1 pip differs by pair, so check it before deciding your lot size
- Treat gold and stock index CFDs as separate from currency pairs
Three categories of currency pairs: majors, crosses and exotics
Currency pairs fall broadly into three groups by trading volume and combination. Knowing the groups makes costs and price movement easier to read.
| Category | Details | Examples | General tendency |
|---|---|---|---|
| Major | The US dollar paired with a major currency | EURUSD, USDJPY, GBPUSD | High liquidity, and spreads tend to be narrower |
| Cross | Major currencies against each other, without the US dollar | EURJPY, GBPJPY, EURGBP | Many have wider ranges than majors |
| Exotic | Pairs with emerging-market currencies and similar | USDTRY, USDZAR, USDMXN | Wide spreads, and sudden moves are more likely |
Among crosses, pairs with the yen are called yen crosses. They are popular in Japan, but majors are easier for beginners to handle at first.
How liquidity relates to spreads
Liquidity means a market where trading is active and orders are filled quickly. The higher the liquidity, the narrower the spread, which is the gap between the buy and sell price, tends to be.
The spread is the real cost you pay on every trade. The more trades you make, the more the difference between pairs affects your results.
- Major pairs have many participants, and their spreads tend to be relatively stable
- Exotics have fewer participants, and their spreads tend to widen
- Around indicator releases or in thin early-morning trading, even majors can widen temporarily
- Actual spreads differ by broker and account type, so check the official page
How trading hours fit volatility
In the currency market, the leading market shifts from Tokyo to London to New York. Different pairs move most at different times.
| Time window | Pairs that tend to move | General features |
|---|---|---|
| Tokyo hours | USDJPY, AUDJPY, NZDJPY | Price moves are relatively calm and tend to stay in a range |
| London hours | EURUSD, GBPUSD, EURGBP | Volume rises, and moves with a clear direction are more likely |
| New York hours | USDJPY, EURUSD, USDCAD | Sudden moves are likely on US indicator releases |
| London and New York overlap | Majors in general | Volume is highest, and price moves tend to be larger |
The basic approach is to choose pairs that move well during the hours when you can trade. For how account server time works, see our related column.
The value of 1 pip differs by currency pair
The profit or loss from a 1 pip move changes by currency pair. Note that even for the same 1 lot, the value differs.
For dollar pairs such as EURUSD, 1 lot on a USD account is about 10 USD per pip. For yen crosses, ¥1,000 per pip on 1 lot (100,000 units) is a guide.
| Currency pair | 1 pip on 1 lot | When it moves 10 pips |
|---|---|---|
| EURUSD (dollar pair) | About 10 USD | About 100 USD |
| GBPUSD (dollar pair) | About 10 USD | About 100 USD |
| USDJPY, EURJPY (yen crosses and others) | ¥1,000 (about 6.4 USD) | ¥10,000 (about 64 USD) |
The risk of holding highly correlated pairs at the same time
Correlation means two currency pairs tend to move in a similar direction. For example, EURUSD and GBPUSD are known to tend to move the same way.
If you hold highly correlated pairs in the same direction, you are effectively making the same trade twice. Your losses can also grow to nearly double.
- If you buy both EURUSD and GBPUSD, you are exposed twice to the rise and fall of the US dollar
- EURJPY and GBPJPY are pulled along by the yen and tend to move together
- Conversely, holding negatively correlated pairs can make profit and loss offset each other
- Correlation is not fixed, and its strength changes over time
Beginners should not stack the same US dollar or yen direction
When you hold several pairs, first decide how much total loss you can accept. Narrowing down to one or two pairs at first also makes them easier to manage.
Swaps, and points to note on gold and stock index CFDs
A swap is the interest rate difference adjustment that arises when you carry a position over to the next day. The effect is small on trades closed within a few days, but it is essential to check for long holds.
- Depending on the pair and the direction of the trade, a swap can be received or paid
- Swap levels differ by broker and change daily
- If you plan to hold long term, check the official page before trading
- Gold (XAUUSD) and stock index CFDs have different specifications from currency pairs
How choosing currency pairs relates to cashback
Many cashback systems calculate returns from the lots you trade. Depending on the pair, it may be excluded or the return rate may differ.
Return amounts are not yet confirmed, and we will post them on each broker's page at launch. Avoid branching into pairs you are not used to just for returns.
- Check the eligible pairs and differences in return rates on the broker's page
- Check separately whether gold and stock indices are eligible
- Before looking at returns, compare the total cost including the spread
- Do not raise your lot size too much to chase returns
Enter a currency pair and lot size to check the profit or loss per pip. Compare the differences between pairs before you trade.
Calculate the value of 1 pipFAQ
Q.Which currency pairs are recommended for overseas FX beginners?
In general, major pairs such as EURUSD and USDJPY, which have high liquidity and tend to have narrower spreads, are easier to handle. Start by narrowing down to one or two pairs and getting used to how they move.
Q.Are exotic currency pairs suitable for beginners?
They are generally hard to recommend, because spreads are wide and sudden moves are likely. If you do trade them, understand the cost and risk and try a small lot first.
Q.Does the value of 1 pip change by currency pair?
Yes. Dollar pairs are about 10 USD per 1 lot on a USD account. For yen crosses, ¥1,000 per pip on 1 lot is a guide. Check with a calculation tool before you trade.
Q.Does cashback change by currency pair?
Some pairs may be excluded or have different return rates. Treatment differs by broker, so check the official page. Return amounts are not yet confirmed, and we will post them on each broker's page at launch.
This article is for information purposes only and is not investment advice. Conditions may change, so please check each broker's official page for the latest information. Offshore FX and CFD trading carries a risk of losses exceeding your principal.
