One of the first questions that come to your mind when you start trading Forex is which are the best currency pairs to trade in Forex. As we said in some previous articles, Forex is a market that stays open to facilitate uninterrupted currency trading. It has the largest volume of the world’s business with forex traders participating from all countries of the world every day.
Moreover, Forex is the premier financial market, which reflects the financial dynamics of world trade. All the trade is a trade-off between the pairs of currencies from two different countries. When you want to invest your funds you should know what are the best currency pairs to trade in Forex. The answer is not as simple as it could seem, and every trader could have his own opinion. The most important thing you should do is to take the time to analyse different currency pairs to determine which are the best currency pairs to trade in Forex for your own strategy.
Due to its great importance, the currency market remains open at all times. That means that you can enter to buy and sell currencies when you want, and you can keep your orders open indefinitely.
As mentioned earlier, forex pairs are traded in Forex. These are financial instruments that relate two different currencies and the basis of Forex operations. When you start trading, you will find a huge number of currency pairs and you may wonder which is the best to trade. However, the answer is not simple.
The best currency pairs to trade will depend on several factors, such as your strategy, personality and trading style. To find the answer, you must test several pairs in a demo account.
Introduction to currency pairs
The currency pairs are the basic unit with which negotiations are made in the Forex market. As the name implies, these pairs are composed of two currencies; one base currency and another quoted currency. The function of the currency pair is to compare the value of a given currency with respect to the other.
In currency pairs, the currency that appears on the left is the base currency, while the other currency is the quoted currency. It should be noted that, in order to identify each currency within the pair, there is a standard international code. Let’s see an example:
EUR / USD: 1,2345
In this currency pair, the euro (EUR) is the base currency, while the USD (dollar) is the quote currency. The example figure shows that 1 euro equals 1.2345 US dollars.
Some currency pairs to trade in Forex
Forex trading is the market where you buy and sell currencies in pairs and to do that it is essential to know how much the currencies in the pair are worth in comparison. This relationship between currencies is what defines a pair. To find the pairs, Forex has an international code that specifies the setup of currency pairs like: EUR/USD 1.23. This code means that one Euro is worth 1.23 Dollars. The stronger currency in terms of widely traded is about the size of the US economy, the US dollar and is the preferred reference in most of the currency exchange international transactions. Here is the list of pairs with high liquidity and the most used for trading, but not necessarily the best and major currency pairs to trade:
EUR and USD pairs. The euro and the U.S. dollar
GBP/USD The British pound sterling and the U.S. dollar
USD/JPY The U.S. dollar and the Japanese yen
USD/CHF The U.S. dollar and the Swiss franc
AUD/USD The Australian dollar and the U.S dollar
USD/CAD The U.S dollar and Canadian dollar
How to identify the best currency pairs to trade in Forex?
To identify the best currency pairs to trade in the Forex market, you should know that major currencies are usually correlated. That means that the two currency price movements are similar. For example, the EUR/USD and the GBP/USD usually move in the same general direction. According to experts the GPB/USD is probably a little more volatile than the EUR/USD, but if the EUR/USD has a clear and obvious up or down trend you can assume that the GBP/USD will follow the same trend. The currency pairs are also associated with their countries financial and political power in the international community. Are those major pairs are the best currency pairs to trade in Forex? You cannot affirm that because traders lose or win money on the fluctuations and it may be better to trade with other currency pairs.
Without any doubt, the major currency pairs are the most popular to operate in Forex. However, that does not mean that they are the only ones available. One option that is worth considering is trading with a pair that includes the local currency of your country. One of the great strengths you can have in Forex is knowledge. And perhaps the currency you know best is the one you use every day. Analyze the charts of the pairs that include your currency and check if they have good volatility. If so, consider seriously using it as an instrument to generate profits.
Globalization is an increasingly widespread phenomenon on our planet, so it is inevitable to see how the currencies of all countries are increasingly related. Therefore, if you want to earn money in the Forex market, it is important that you understand the dynamics of the markets and the connections between different economic factors and currencies around the world.
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If you still not sure about which are the best currency pairs to trade in Forex you can contact with our agents to start investing your funds with a managed Forex account.