Forex FAQ

What are the differences between pairs, majors, and crosses in Forex trading?

Some beginner traders mistakenly refer to all currency pairs as "crosses" such as "the EUR/USD cross". The EUR/USD is not a cross, but EUR/JPY is. GBP/USD is not, but GBP/JPY is. In these cases, what he/she really means to say is just pair.


The difference is a bit of a trivial technicality that won't likely affect your profits or losses, but it's a difference that shows some understanding of the history of Forex. (And, whether you're a financial journalist or just a forum participants, it doesn't hurt to avoid sounding like you just discovered FX trading last night.)

They are all pairs. Major pairs and cross pairs... but they are two entirely different categories.

Technically, a major pair is one of the top volume currencies traded against the US Dollar. This meaning originated at a time when the US Dollar was widely accepted as the international reserve currency (for the most part, it still is at the time of this writing.) The most widely-traded of the majors are: EUR/USD, GBP/USD, USD/JPY and USD/CHF. They are pairs and they are majors, but they are NOT "crosses".

A cross pair is any Forex pair with a value that can be derived from two of the above, such as EUR/JPY and GBP/CHF. The name comes from the historical fact that these pairs are actually a combination, or cross, of two major pairs. For example, if you short sell the EUR/JPY, you are actually simultaneously short selling two majors, EUR/USD together with a proportionate amount of USD/JPY, at the same time. If you recall from math class, the B cancels out when you multiply A/B by B/C - so EUR/USD x USD/JPY = EUR/JPY.

Again, this is not of vital importance to your ability to trade profitably. For that, you might as well go around calling them sticks and stones for all it matters for your account balance. It's just worth knowing these things if you plan to write about FX and there've been more than one financial journalist making this mistake repeatedly.

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