What’s the best currency pair to trade in Forex?
Posted: Jun 28, 2019
It’s not easy for beginner traders to get started in the market, they have many things to learn and they have to constantly upgrade their strategies because what works today can become forgotten tomorrow.
It’s useful for you to get the information in tiny bits, it will help you create your strategies and determine what currencies to trade. Speaking of currencies, picking the right pair is more important than creating an intricate methodology. The market is overflowed with currencies and you may have no idea what pair you should choose. You’ll not find a clear answer to your question, the perfect pair is different for every trader. You have to determine which one works best for you.Currency pairs – what are they?
As a forex trader you sell and buy currencies this is the only action you can do on the Forex market. To make a profitable trade you need to do research to find out what the value of every one of the currencies you buy or sell is. All currency pairs are defined by their relationship. Every one of them includes two abbreviations, and the value of the main currency. This code is used internationally, so no matter what market you choose to trade the meaning is the same. Let’s take USDEURO 2.33, it means that one USD is worth €2.33.It’s advisable to start with a common pair of currencies
You’ll find countless currencies in the Forex market, many of them are so exotic you may have never heard of them. If you want to start trading them, no one can stop you, but as a beginner, it’s not advisable to do it. Around 80% of the trades placed in the market are around 8 currencies: Euro, US dollar, British pound, Canadian dollar, Australian dollar, Japanese Yen, Chinese Yuan and Swiss franc.
Mixing them will result in 28 currency pairs, and if you would ask a professional, they will tell you to stick with one of them, at least until you learn more about the volatility of the market. However if you want a sure profit then we can further reduce the list to 8 combinations: EUR/GBP, EUR/USD, EUR/JPY, USD/JPY, USD/CHF, USD/CAD, AUD/USD, and GBP/USD.
Once you get more experienced, you can start expanding your trades to other pairs or even to other currencies.Create a strategy
The best strategy when trading in the forex market is to stay organised and to create a routine. Here is an example of a strategy that will help you gain a profit.Check the charts
Before you set a trade, you should always check the charts. You should do it in the morning, while you drink your coffee or while on the train to your office. Check the evolution of each one of the pairs, and you will easily understand which one is profitable. When you open up the charts, focus on identifying the pairs that perform the better and the currency that has the same evolution related to all the other ones. If you want to trade forex successfully, doing research is an essential step.Pay attention to the latest news
The next step is to check the news, you can do it by watching TV or by reading an online newspaper. You should know what’s happening in the world before you trade currencies. Check the interest rates, the evolution of the stock market, political events with financial repercussions, negative events like wars and revolts and other similar things that can influence the value of certain currencies. The latest news can help you determine the markets that will face the greatest volatility in the near future. The golden rule is to avoid trading in an extremely volatile market. Don’t get us wrong, volatility is good, but you should avoid it until you gain more experience.Check expert advice
You are a beginner so you should look for the guidance of experts. It doesn’t matter if you like the person or not if they made money trading currencies they have some valuable pieces of information they can share. Pay attention to what they have to say and try to follow their recommendations. You should subscribe to Forex blogs, check forums, and follow on social media famous traders. Any tip could help you make a profit.Base your trades on analysis
You should treat trading similar with working on a diet, you base your decisions on research and analysis. You try to determine what is good for you and then you apply it. Not that you’ve checked the trends and the charts, and you are in touch with the latest news, you can understand what indicators are favourable and chose a currency pair. You should always follow your convictions, there will be times when you will get it right, and there will be times when you will lose money. Manage your risk, follow your rules and you will succeed.
Cynthia Madison is a young blogger and economics and marketing graduate. She writes about home, lifestyle and family topics and is a senior contributor to popular niche publications.