i. Minor currency pairs include pairs of all major currencies except the US Dollar.
ii. Minor currency pairs are more volatile than major currency pairs and trends last longer in minor currency pairs.
iii. Minor currency pairs have enough liquidity and volume for it to be traded.
iv. Strategies that can be used on major currency pairs can also be used on minor currency pairs but it will need some tweaks.
What are minor currency pairs?
Well, I am sure you know that the foreign currencies that are traded on the forex market are not to be traded standalone but rather are traded in pairs.
GBPUSD, EURUSD, GBPEUR, EURJPY, etc. are examples of the various currency pairs that are listed on the forex market for traders like you and me to trade.
In these currency pairs, there are two categories, namely major currency pairs and minor currency pairs.
Major currency pairs are those pairs that are paired with the USD. For example, EURUSD, USDJPY, USDCAD, etc.
On the other hand, minor currency pairs are all those currency pairs that are not paired with the USD.
For example, EURGBP, EURNZD, JPYCAD, CHFGBP, etc. These currency pairs are also known as cross-currency pairs at times.
The US is arguably the biggest country in the world, not in terms of size or demographics but in terms of the power and influence, it holds on the global level.
This is the reason why currency pairs that have the US Dollar in them are known as major currency pairs.
Coming to the minor currency pairs, are these actually just some minor currency pairs? Are they not worth trading? I am sure you will have such questions in your mind.
Read all that I will discuss further in the blog post and you will get answers to all such questions.
Why you should trade minor currency pairs?
It often happens with forex traders that they only include the major currency pairs in their watchlists and they pay no heed to the minor currency pairs at all.
I don’t really blame them for this because all the educational content that is out there is based on the major currency pairs.
So unconsciously it makes it seem like all that the traders learn will work only on the major currency pairs and not on the minor currency pairs.
But lucky for you, I am writing this blog post to put light on the overlooked minor currency pairs and how traders that don’t trade these are missing out on potential profits.
1. Moves more compared to major currency pairs
While I was just getting started in my trading journey I came across an article that had some statistics about the currency pairs and I was shocked to see that some of the minor currency pairs had more volatility than the major currency pairs.
There are several minor currency pairs that have more price swings than the major currency pairs, and for a trader, these are ideal conditions.
The more a currency pair is volatile, the more it will move during the trading sessions. This gives traders like you and me more opportunities to trade.
It’s not that if minor currency pairs move more so trading will become easier for you. You will have to put in the work to find these opportunities and will have to be diligent enough to grab them.
2. Trends last longer on minor currency pairs
Minor currency pairs give more opportunities to trade because of their higher volatility but when the higher number of opportunities also comes better and quality opportunities.
The quality is in terms of longer-lasting trends and if you manage to spot one and get in, you will make some decent profits till it lasts.
Now, in order to capitalize on these longer and bigger trends in the minor currency pairs, you need to know how to spot trends and how to get in and ride them.
You will need all the trading knowledge to actually earn those profits for yourself.
3. Major currency pairs get affected a lot because of fundamental factors
Major currency pairs are all those pairs that have the US Dollar as one currency in the pair.
The US is the most powerful country and everything that happens on the global scale tends to affect the US too.
What happens here is that the major currency pairs are exposed to fundamental factors that can influence prices a lot.
Even if the event does not have anything to do with the other currency in the pair, there are high chances that it will affect the US Dollar and in turn, will affect all major currency pairs.
This is where minor currency pairs have an advantage. The minor currency pairs as a whole are not going to get affected by specific fundamental events.
Traders can be assured that they have some protection in such cases and can trade minor currency pairs with conviction.
4. Trading minor currency pairs give more options
Statistically, there are 27 currency pairs that can be made out of the 8 major currencies. Out of this, 7 are major currency pairs.
If you as a trader only track the major currency pairs, then you will be discarding around 20 currency pairs that you could have kept an eye on and made some profits.
Out of the remaining 20, let’s consider that only 10 are worth trading, that’s a total of 17 currency pairs that you can have on your watchlist.
If you have these many currency pairs in your watchlist and you diligently track these, I can assure you that you will find lots and lots of trade opportunities.
Play the game of big numbers. Increase your opportunities and let the odds decide whether you win or you lose.
Misconceptions around minor currency pairs
By now, I believe that you have a decent idea about minor currency pairs and what they bring to the table.
I also expect that you realize that these minor currency pairs are worth looking at and maybe you should give it a try for yourself and see how things work out.
If you are to read about minor currency pairs on the internet, then you will come across numerous articles, videos, and whatnot that are full of misconceptions about minor currency pairs.
In this part of the blog post, I want to address these misconceptions and try to clear the waters.
1. Minor currency pairs do not have much volume and liquidity
This is the most common thing said about minor currency pairs and it is something that drives me nuts.
I have seen traders that literally trade just a capital of just $1000 making such claims.
I want you to understand that the currency pairs that are listed on the forex market will be traded by the big money, or the whales as I call them, and they in turn, provide the liquidity.
These whales are not going to shy away from the minor currency pairs because just that they are ‘minor’. If they can find opportunities in these currency pairs then so can you.
Let me tell you one more thing, every currency pair will have volume and liquidity during the major sessions like the Asian, European, and American sessions.
You do not have to worry about things like liquidity and volumes in minor currency pairs, but what you should worry about is the opportunities that you will miss out on if you do not trade these currency pairs.
2. Strategies don’t work in minor currency pairs
What is a strategy? It is just some rules that you lay down that you follow and hope that it leads to a profit.
What are these rules based on? It is based on some form of analysis that you and I as traders will carry out. It will be something that we have seen happen in the market and we expect it to happen again.
Now tell me, strategies won’t work in minor currency pairs?
If you apply any random strategy to any currency pair then maybe it won’t work or even if it does then it won’t work as you wanted it to.
But this is not the approach that you should have in trading. You cannot just apply any random strategy to any particular currency pairs and vaguely hope for it to work.
You need to devise different trading strategies for different currency pairs. If you manage to do this then the strategy will work.
If it still does not work then you should take it as your cue to work on improving the strategy or maybe finding a completely new strategy.
3. Spread are higher in minor currency pairs
Spreads are a problem. I will not deny it because I have been trading forex for quite some time now and spreads have been a pain for me at times.
Minor currency pairs do have some spreads in play. But should this discourage you from trading minor currency pairs? No, I’ll tell you why.
Spreads are a problem when it takes up a large part of your profits. If you find a setup that can fetch you say 10 pips and if the spreads are around 5 pips then that is a problem.
But what if, your profit target is 100 pips and the spreads will take away just 5 pips from you. Will you still get scared from spreads?
What I mean to infer with this is that if you figure out a strategy that is more of a swing trade or a longer-term based then you will not have a problem trading minor currency pairs.
Yes, your options of scalping or day trading may be limited to some extent. You may get decent opportunities to scalp or even day trade the minor currency pairs at times, but it won’t be something that you can always do.
If you cannot scalp or day trade then you can always swing trade. So then why get such a bad image around minor currency pairs?
Are minor currency pairs better than major currency pairs?
A quick answer to this question will be a big no. Minor currency pairs are not better than major currency pairs.
Major currency pairs are the ‘majors’ for a reason. They will have the most volumes and liquidity and will have the lowest spreads.
In this blog post, I had no intentions of establishing minor currency pairs as the better ones over major currency pairs.
I have been coming across many articles on Google and other platforms, and many videos on YouTube that say that minor currency pairs are not worth it.
Through this blog post, I just wanted to change the narrative and put the actual picture out there.
If you keep comparing the minor currency pairs with the major currency pairs then you will never trade the minors.
What I believe is that you should combine both and should try and work with everything.
Like I mentioned above, the more currency pairs you have on your watchlist, the more opportunities you get to trade and make a profit.
You should know that these opportunities aren’t going to give you easy profits, you will have to work hard to get them.
You will need to have a strategy to trade the minor currency pairs, you will need to have a trade plan and a set of rules, and most importantly, you will need to manage risk properly.
Apply all this on any given currency pair and I assure you that if you have the odds in your favor then you will make a profit.
How to trade minor currency pairs?
Minor currency pairs will be just like any other currency pair or any other financial asset.
Strategies that work on other currency pairs or financial assets may not necessarily work on the minor currency pairs but the basic principle of demand and supply will apply.
Trading is a game of demand and supply. Each time demand exceeds supply, the price moves up. When supply exceeds demand, the price moves down.
In minor currency pairs you can always expect this principle or phenomenon to work and you need to have a strategy and trade plan to capitalize on this.
If you have had decent experience in forex trading or even in the trading space in general, then you will know some of the strategies that traders use to capitalize on the price swings.
You can use support and resistance zones to trade the minor currency pairs. These will allow you to trade demand and supply very efficiently.
Strategies on chart patterns such as triangles, wedges, tops and bottoms, etc. can help you too.
Indicator trading is also something you can experiment with on minor currency pairs and try to devise a trade plan around it.
I have even seen traders that trade minor currency pairs based on fundamentals and this is something that you can surely use to capitalize on the price swings of the minor currency pairs
When are you going to start trading minor currency pairs?
Do let me know when you start trading minor currency pairs and also whether this blog post was any good in encouraging you to explore such currency pairs.
If you do trade minor currency pairs, what strategies do you use and what is your trade plan?
Share this blog post with others and let them also tap into this side of forex trading that is often put in a lot of shade.
Feel free to reach out to me through the comments section for absolutely anything and I will make sure to get back to you at the earliest.