You will pay higher transaction costs (spreads) on currency pairs that are “thinly traded.” In simple terms: the fewer people buying and selling a specific pair, the wider the gap between the buy and sell price will be, and the more you pay in fees.
What Makes a Spread “High”?
A spread is the difference between the Bid (sell) and Ask (buy) price. It is the cost of doing business. Spreads typically widen in three specific scenarios:
1. Exotic Currency Pairs
These are the most expensive pairs to trade. Pairs like USD/TRY (Turkish Lira), USD/ZAR (South African Rand), or USD/MXN (Mexican Peso) involve currencies from developing economies. Because these currencies are not traded as frequently as global majors, there is less liquidity, forcing brokers to charge a “premium” (wider spread) to cover their own risk.
2. Cross Pairs (Minors)
Pairs that do not include the US Dollar, such as EUR/GBP, GBP/JPY, or AUD/CAD, generally have higher spreads than “Majors” (like EUR/USD). Since the US Dollar is involved in the vast majority of all global forex trades, pairs without it lack that massive “pool” of daily volume, resulting in a wider gap between buy and sell orders.
3. Low-Liquidity “Dead” Hours
Even a low-spread pair like EUR/USD can become “expensive” if you trade it at the wrong time. During the quietest hours of the Asian session or on public holidays, there are fewer traders online. When volume dries up, brokers widen their spreads to account for the lack of available counterparties.
Forex Currency Pair Types: A Quick Reference
Key Takeaways for FX Traders
- Majors: The ideal choice if your strategy involves frequent trading (scalping), as the tight spreads won’t “eat” your profit.
- Crosses: Excellent if you want to capitalize on specific movements in currencies like the Yen or the British Pound, but be prepared for slightly higher transaction costs per trade.
- Exotics: Only trade these if you have a solid, long-term fundamental plan. Day trading these is rarely viable due to the high cost of entering and exiting the market.
The 2026 Golden Rule
Regardless of the pair type, always check the active trading hours. Even the “cheapest” major pair will become “expensive” (the spread will widen) if you attempt to trade during low-liquidity hours, such as holidays or the deep hours of the Asian session.
Understanding Spread vs. Strategy
FAQ
1. Should I avoid pairs with high spreads entirely?
Not necessarily. High spreads are a “cost of doing business.” If your strategy targets 100+ pip moves, a 10-pip spread is manageable. If you are trying to catch 5-pip moves, high-spread pairs will turn your profitable strategy into a losing one immediately.
2. Can I get a low spread on an exotic pair if I use a “cheap” broker?
Be careful. If an exotic pair has an unusually low spread, the broker might be hiding the cost in higher commissions or “slippage” (giving you a worse price than you clicked on). Always check the total cost, not just the spread number.
3. When is the best time to trade higher-spread pairs?
Always trade them when the London and New York sessions overlap (typically 8:00 AM – 12:00 PM EST). This is when global volume is at its peak, which naturally forces even the widest spreads to tighten.
