Forex Currency Pairs, Pips and Futures Explained
Every forex trade is made on a currency pair, and every price move is measured in pips. This beginner guide explains what a forex pair is, what a pip is, the difference between major, minor and exotic pairs, what forex futures are and which futures contracts are popular with futures prop firm traders.
What is a forex currency pair?
Forex means trading one currency against another, so currencies are always quoted in pairs. In a pair like EUR/USD, the first currency (EUR) is called the base currency and the second (USD) is called the quote currency.
The price tells you how much of the quote currency you need to buy one unit of the base currency. If EUR/USD is 1.1000, then 1 euro costs 1.10 US dollars.
- Buy: you buy the base currency and sell the quote currency. You expect the base currency to get stronger.
- Sell: you sell the base currency and buy the quote currency. You expect the base currency to get weaker.
What is a pip?
A pip is the standard unit used to measure a price move in forex. For most pairs a pip is the fourth decimal place (0.0001). For pairs that include the Japanese yen, a pip is the second decimal place (0.01).
USD/JPY moves from 150.00 to 150.50 = 50 pips
Many brokers also show a fifth decimal place, called a pipette, which is one tenth of a pip. The money value of one pip depends on the pair and on your lot size. On a standard lot of EUR/USD, one pip is worth about 10 US dollars. To turn pips into a lot size, read our guide on the forex position size calculator.
Major currency pairs
Major pairs are the most traded pairs in the world. All of them include the US dollar. They usually have high liquidity and lower spreads.
| Pair | Currencies |
|---|---|
| EUR/USD | Euro and US dollar |
| GBP/USD | British pound and US dollar |
| USD/JPY | US dollar and Japanese yen |
| USD/CHF | US dollar and Swiss franc |
| USD/CAD | US dollar and Canadian dollar |
| AUD/USD | Australian dollar and US dollar |
| NZD/USD | New Zealand dollar and US dollar |
Minor currency pairs (cross pairs)
Minor pairs do not include the US dollar. They are made of two major currencies, such as the euro, pound, yen, Swiss franc, Australian dollar or Canadian dollar. They are traded less than the majors, so spreads are often a little wider. Some crosses, like GBP/JPY, can move fast.
Examples: EUR/GBP, EUR/JPY, GBP/JPY, EUR/CHF, GBP/CHF, AUD/JPY, NZD/JPY, CAD/JPY, EUR/AUD, EUR/CAD, GBP/AUD, AUD/CAD.
Exotic currency pairs
An exotic pair combines a major currency with the currency of a smaller or emerging economy. They are traded much less, so spreads are usually wider and price can move in big jumps. This makes trading costs and risk higher.
Examples: USD/INR, USD/TRY, USD/ZAR, USD/MXN, USD/SGD, USD/HKD, USD/NOK, USD/SEK, USD/PLN, USD/THB.
What are forex futures?
A forex future is a standard contract to buy or sell a currency at a fixed price on a set date in the future. Futures are traded on an exchange, such as the CME in the United States. Every contract has the same size, the same expiry date and the same rules.
| Spot forex | Forex futures | |
|---|---|---|
| Where it trades | Over the counter, through brokers | On an exchange |
| Contract size | Flexible lot sizes | Fixed by the exchange |
| Expiry | No fixed expiry | Fixed expiry date |
| Size is counted in | Lots | Contracts |
Futures use margin, which means you control a large contract with a small deposit. This can increase profit, but it can also increase loss very fast, even more than your deposit.
Which currency futures are traded?
The main currency futures are quoted against the US dollar. Each one has a ticker symbol and a fixed contract size.
| Contract | Ticker | Contract size |
|---|---|---|
| Euro FX | 6E | 125,000 EUR |
| British pound | 6B | 62,500 GBP |
| Japanese yen | 6J | 12,500,000 JPY |
| Australian dollar | 6A | 100,000 AUD |
| Canadian dollar | 6C | 100,000 CAD |
| Swiss franc | 6S | 125,000 CHF |
| New Zealand dollar | 6N | 100,000 NZD |
| Mexican peso | 6M | 500,000 MXN |
| Micro EUR/USD | M6E | 12,500 EUR |
| Micro GBP/USD | M6B | 6,250 GBP |
| Micro AUD/USD | M6A | 10,000 AUD |
The US Dollar Index futures (DX) track the dollar against a basket of currencies. Note that some futures are quoted differently from spot forex. For example, the yen future (6J) is quoted in US dollars per yen, so its price looks different from USD/JPY.
Other popular futures contracts
Many futures traders, including traders who use futures prop firms, mostly trade stock index, gold and oil futures along with currency futures. Most of them have a smaller micro version.
| Market | Standard | Micro | Value per point (standard / micro) |
|---|---|---|---|
| S&P 500 index | ES | MES | $50 / $5 |
| Nasdaq-100 index | NQ | MNQ | $20 / $2 |
| Dow Jones index | YM | MYM | $5 / $0.50 |
| Russell 2000 index | RTY | M2K | $50 / $5 |
| Gold | GC | MGC | $100 / $10 per 1 dollar move |
| Crude oil | CL | MCL | $1,000 / $100 per 1 dollar move |
Other markets include silver (SI, micro SIL), natural gas (NG) and micro crypto futures such as Micro Bitcoin (MBT) and Micro Ether (MET). Contract details can change, so always check the official exchange website for the latest specifications.
What is a futures prop firm?
A futures prop firm is a company that gives traders a chance to trade with the firm capital. The usual steps are:
- The trader pays a fee and starts an evaluation, usually on a simulated account.
- The trader must follow fixed rules, such as a profit target, a daily loss limit, a maximum drawdown and a limit on the number of contracts.
- If the trader passes, the firm may give a funded account, and the trader keeps a share of the profits.
Keep these points in mind: the fees are usually not refunded, the rules are strict, many traders fail the evaluation, and rules are different in every firm. Read the rules of any firm carefully before you pay. Forexology does not recommend any prop firm.
Position size in futures
Futures are traded in contracts, not lots. You need the value of one point for your contract (see the table above).
Example: you risk 500 US dollars on Micro E-mini S&P 500 (MES) with a 10 point stop loss. One point on MES is worth 5 US dollars.
Contracts = 500 / (10 x 5) = 10 contracts
For forex lots, see our guide on the position size calculator. You can also check when major markets are active in our forex trading sessions guide.
Important risk note
Forex and futures trading use leverage and carry a high risk of loss. You can lose more than your deposit in futures. Rules for trading currencies and futures are different in every country, including India, so please check your local laws and use only regulated brokers. Forexology does not recommend any broker, prop firm or trade, and this page is only for education.
Frequently asked questions
What does EUR/USD mean in forex?
EUR/USD is a currency pair. The first currency (EUR) is the base currency and the second (USD) is the quote currency. If EUR/USD is 1.1000, it means 1 euro costs 1.10 US dollars.
What is a pip in forex?
A pip is the standard small price move in a currency pair. For most pairs it is 0.0001 and for pairs with the Japanese yen it is 0.01. If EUR/USD moves from 1.1000 to 1.1020, it moved 20 pips.
What are the major forex pairs?
The major pairs are the seven most traded pairs and all of them include the US dollar: EUR/USD, GBP/USD, USD/JPY, USD/CHF, USD/CAD, AUD/USD and NZD/USD.
What is the difference between major, minor and exotic pairs?
Major pairs include the US dollar and the most traded currencies. Minor pairs, also called cross pairs, do not include the US dollar. Exotic pairs combine a major currency with the currency of a smaller or emerging economy. Exotic pairs usually have wider spreads and lower liquidity.
What are forex futures?
A forex future is a standard contract to buy or sell a currency at a fixed price on a set future date. Futures are traded on an exchange and have a fixed contract size and an expiry date.
Are forex futures the same as spot forex?
No. Spot forex is traded over the counter and has no fixed expiry, while futures are traded on an exchange with fixed contract sizes and expiry dates. Both involve high risk.
What is a futures prop firm?
A futures prop firm is a company that lets traders take an evaluation, usually on a simulated account with fixed rules such as a profit target and a maximum loss. Traders who follow the rules may get a funded account and share the profits with the firm. Fees are usually paid by the trader and many people fail the evaluation, so it carries risk.
What is a micro futures contract?
A micro contract is a smaller version of a standard futures contract, usually one tenth of the size. For example, MES is the micro version of the E-mini S&P 500 and M6E is the micro version of the Euro FX future.
How do I calculate position size in futures?
Futures are traded in contracts, not lots. The number of contracts is your risk amount divided by the stop loss in points multiplied by the value of one point for that contract.
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