What's Available for Trading
Currency pairs are the heart of forex. They're categorized into three main groups based on liquidity and trading volume:
The Majors
Most LiquidThe most popular and heavily traded pairs. They all involve the US Dollar (USD) and represent the world's largest economies (e.g., EUR/USD, GBP/USD, USD/JPY). Why they have tighter spreads: More traders means more competition between buyers and sellers. When thousands of people want to buy and sell at similar prices, brokers can offer tighter spreads because they can easily match orders. Think of it like a busy marketplace vs. a quiet one—more activity means better prices.
The Minors (Crosses)
Good LiquidityThese pairs consist of major currencies cross-referenced with each other, without involving the USD. Examples include EUR/GBP, GBP/JPY, and AUD/CAD. They are also quite liquid but usually have slightly wider spreads than the majors.
The Exotics
Higher RiskThese pairs involve a major currency paired with a currency from an emerging or smaller economy, like USD/MXN (US Dollar/Mexican Peso) or EUR/TRY (Euro/Turkish Lira). Why they're riskier: Fewer traders means less competition, so brokers charge wider spreads to compensate for the difficulty of finding matching orders. Political and economic instability in emerging markets also causes sudden, unpredictable price swings that can move 200+ pips in minutes.
Beyond Currency Pairs: Other Markets
While currency pairs are the core of forex trading, most brokers also offer access to other global markets—all traded as Contracts for Difference (CFDs), just like the currencies above. This means you can diversify across different asset classes from the same trading account:
Precious Metals
Safe HavensGold and silver are traded like currency pairs, typically against the US Dollar. They're popular during economic uncertainty when investors flee to safe-haven assets. Gold (XAU/USD) is the most liquid precious metal, with tight spreads similar to major forex pairs.
Example: XAU/USD at 2,050 means 1 ounce of gold costs $2,050. If it moves to 2,100, that's a $50 move per ounce.
Energy Commodities
High VolatilityOil and natural gas are crucial global commodities that move based on geopolitics, supply/demand, and economic growth. Crude oil (WTI and Brent) are the most traded energy CFDs. These markets can be extremely volatile, especially during supply disruptions or OPEC decisions.
Trading Tip: Oil prices often correlate with certain currencies like CAD (Canada is oil-rich) and NOK (Norway exports oil).
Stock Indices
Market SentimentIndices track the performance of a basket of stocks from a specific market or sector. Trading indices gives you exposure to entire economies rather than individual stocks. They're excellent for gauging overall market sentiment and often show strong trends.
Correlation: Indices often move inverse to safe-haven currencies. When SPX500 rises (risk-on), USD/JPY typically rises too as investors move money from safe JPY into riskier assets.
Individual Stocks
Company SpecificMany brokers offer CFDs on popular individual stocks, allowing you to trade companies like Apple, Tesla, Amazon, or Google with leverage. These move based on company earnings, news, and sector performance.
Cryptocurrencies
Extreme VolatilityBitcoin, Ethereum, and other cryptocurrencies are available as CFDs at many brokers. These are the most volatile instruments available, with price swings of 5-10% in a single day being common. Only for experienced traders with strong risk management.
⚠️ Warning: Crypto CFDs can move 500+ pips in minutes. A 1 lot position can gain or lose thousands of dollars in an hour. Not recommended for beginners.
Understanding CFDs: What You're Actually Trading
Important: When you trade forex or any of these instruments through a retail broker, you're trading Contracts for Difference (CFDs). This means you don't actually own the underlying asset. When you "buy" EUR/USD, you don't own actual Euros. When you trade gold, you don't own physical gold. You own a contract that mirrors the price movements. When you close the trade, you settle the difference in cash—hence "Contract for Difference."
Advantages
- • Trade with leverage (control large positions with small capital)
- • Go long (buy, profit when price rises) or short (sell, profit when price falls)
- • No physical delivery or storage concerns
- • Access to global markets from one account
Risks
- • Leverage magnifies losses just like profits
- • Overnight fees (swap) apply when holding positions
- • Some instruments extremely volatile (oil, crypto)
- • No ownership rights or dividends
Beginner Tip
When you're ready to start trading, always look for brokers that have a wide variety of instruments. You never know where the opportunity resides. However, as a beginner, stick to the majors initially—they offer the best combination of liquidity, tight spreads, and predictable behavior. Once comfortable, you can explore gold (XAU/USD) and major indices, which have similar liquidity to forex majors.