If there is one market that has seen tremendous growth in participation and investment, it is the Forex market. The reason behind this is the ease of trading. Gone are the days when you would need an exchange medium for Forex trading. Over-the-counter trading has replaced all traditional means and has connected the world at large.
If you wish to sum up the Forex market in a small phrase, it will resonate with the dialogue from the movie Wall Street – ‘money never sleeps.’ From 22:00 GMT Sunday to 22:00 GMT Friday, the Forex market remains open day and night for trading. This allows you to trade at a time that you desire or are comfortable with.
Forex Trading and Beginners
One has to start from somewhere to reach their goal. If you are new to Forex trading, you might feel confused and overwhelmed. With several currency pairs available for trading, you are allowed to feel so. Not only will you be on the lookout for the best currency to trade in Forex, but you also need a reliable broker that offers a user-friendly trading platform to you.
You will continuously look for the most accessible currency pair to trade or the most profitable currency pairs. Let us help you out with such questions. There is no such thing as the best currencies to trade.
Every trader has a different end goal, trading strategy, and comfort zone. The currency pair that will best suit a trader will depend on several factors. Therefore, instead of asking what the best currency pairs to trade are, ask yourself which pair will fit your profile the most.
The only way to reach a concluding point is by educating yourself. Once you get the basics right and now about your options, finding the currency pair for your profile will be easier. Read this article to educate yourself concerning the various aspects of Forex trading.
Define Forex Trading
Also known as foreign exchange trading, Forex trading refers to the act of continually buying and selling currencies in pairs. One never trades a single currency; it is always done in pairs. Therefore, you need to be aware of the relationship that the two countries of your chosen pair share. For this, you need to research both currencies.
Talking about the currency pair, it consists of abbreviations of both the currencies. One currency will be the base currency in this pair, while the other will be the quote or the counter currency. Every currency pair has an international code. For example, the EUR/USD 1.23 translates to the value of one Euro that fetches $1.23. In this pair, the Euro or the EUR is the base currency, while the US dollar is your quote or counter currency.
Major Forex Trading Pairs
The best currency to day trade may vary from trader to trader, but the answer to the most popular traded currency is the US dollar. It does not come as a surprise given the strength of the US economy and its respective currency. It is also the most preferred currency when it comes to imports and exports. It is a dominant reserve currency.
There is no such thing as significant currencies in Forex trading as one currency may be more valuable from its purchasing power standpoint and yet not traded enough. Therefore, we focus on the most popular currency pairs instead. These currency pairs are actively traded throughout the day and have higher liquidity. We would still like to point out that these are still not the ‘best’ currencies, just the most popular ones. This list consists of the following pairs:
- EUR (Euro)/USD (US Dollar)
- USD (US Dollar)/JPY (Japanese Yen)
- GBP (British Pound)/USD (US Dollar)
- AUD (Australian Dollar)/USD (US Dollar)
- USD (US Dollar)/CHF (Swiss Francs)
- USD (US Dollar)/CAD (Canadian Dollar)
Every primary currency sees fluctuations in its value according to its counterpart. These fluctuations are affected by the trade volume between the two. You will notice that these major currency pairs have denominations from the countries with high international trade volumes. Since many traders are conducted in these currencies, their volatility is more elevated, creating more profit-making opportunities.
Let’s come back to the question, is any of these the best currency to trade right now? Not necessarily! The chances of making and losing money in Forex trading persist in every currency pair. No pair comes with any guarantee. The difference is that because of larger trade volumes, they have a more organized network of trading; that is, you can expect better brokers and tighter spreads. The ultimate result will still depend on several other factors.
What are The Best Currency Pairs to Trade?
The best currency pairs to trade are forex pairs that fit your strategy, working time, personality, and your interest. There is no secret rule or good forex trades that will suit everyone. However, most traders trade major forex pairs (EURUSD, GBPUSD, USDJPY, etc.), that have high liquidity, moderate volatility, the best technical and fundamental analysis represented in internet media and literature.
If you are looking to trade the best currency trade right now and you are a trend trader you will enter into BUY trade if you see new higher highs, excellent economic news, good overall bullish projections. Of course, you need to be interested in that currency and that country’s economy as well.
Best currencies to trade checklist:
- Choose forex pairs that are active in your working time (I live in Europe and like to trade EURUSD and GBPUSD).
- Choose currency pairs that have lower volatility for range trading or high volatility and clear trend for trend trading.
- The best forex pair to trade is pair for which you have a lot of data (price data, patterns, economic indicator data, etc.)
- Choose pairs that you traded before, that you have experience in trading – routine and knowledge.
- Avoid exotic pairs if you are a beginner trader.
The Forex market offers a vast turf. There are more than 200 countries in the world, and a majority of them in foreign exchange. However, it must be noted that not every currency is equally promising. Yes, a good trader can make the odds work in his favor, but it is always better to avoid unnecessary risks. So, what are the best currency pairs to trade?
The most popular currencies that are traded in the world are:
- US dollar
- Australian dollar
- Canadian dollar
- British pound
- Euro
- Swiss franc
- Japanese yen
You will see one or two currencies in almost every famous currency pair from this list. For any trader who wants to be a successful Forex trader, they must aim for a deeper understanding of the currencies they intend to trade. We have discussed below some of the currency pairs. Read about them for more straightforward trading solutions.
Forex Pair Analysis
1. EUR/USD
This is the most popular Forex pair for trading. One of the best benefits of trading this pair is low spreads. Most traders employ technical analysis rather than fundamental analysis. This currency pair is not too volatile. If you want to do risk aversion trading, this currency pair will be the best fit for you. Another advantage of trading a popular pair like this one is that you can find a lot of information, and in Forex, you can never have enough information.
2. GBP/USD
Possible large jumps and profitable pips have added to the popularity of this currency pair. This pair, however, is not the right fit for those who wish to avoid the risk. As this pair allows you to make higher profits, you need to be prepared for risks. This puts the GBP/USD in the list of volatile currency pairs. With the help of market analysis, you can take advantage of this pair.
3. USD/JPY
This is yet another pair of currencies that see a huge volume in the number of transactions every day. You will get low spreads for this pair. You will witness a smooth trend with this pair as compared to the other. It offers several profitable opportunities to traders and investors.
The currency pairs mentioned above come with tight spreads except for GBP/USD because of its high volatility. To make more profits, it is better to go for lower spreads and avoid higher spreads.
Of course, the best time to trade USDJPY is during the USD trading session.
Exotic and Minor Currency Pairs
We have already read about the most popular currency pairs and saw that they all include the currencies that are heavily traded daily. There are some other pairs known as cross-currency or minor pairs, which do not include these popular currencies, specifically the US dollar. The downside to these pairs is the lack of sufficient liquidity and wider spreads. Still, the liquidity is sufficient enough to make them tradable. Some of these currency pairs are:
- AUD/CAD
- EUR/CAD
- EUR/CHF
In addition to these minor, there are some exotic pairs as well. These pairs include currencies of emerging economies. These are the least liquid pairs, and the spreads are the largest. Some of these exotic pairs are:
- EUR/RUB (Euro and Russian Ruble)
- USD/CLB (US Dollar and Chilean Peso)
- GBP/SGD (Great Britain Pound and Singapore Dollar)
- USD/SEK (US Dollar Swedish Krona)
Fundamental and Technical Analysis
To be a master at anything, you need to upskill yourself every day. In Forex trading, this can be done by keeping yourself educated at all times. One needs to be disciplined and patient to see good results. A good trading strategy in the Forex market is based on either fundamental analysis or technical analysis.
When we are trading currencies, we need to understand that they are not your generic commodities or assets. These are flag-bearers of a country’s economic status. The strength of a currency and the economic strength of its respective country always go hand in hand. Fundamental analysis is based on this principle. Many factors can affect a country’s position, like political stability, monetary policies, GDP, interest rate, and more. A trader who forms strategies based on fundamental analysis will always follow news related to these factors.
On the other hand, technical analysis primarily focuses on technical indicators, price action, and/or financial instruments of the country. This is done to predict future price movements.
Reliable Forex Trading Platforms
Every transaction now happens virtually; therefore, you must be using a reliable and safe trading platform. Your trading platform has the potential of interfering with your trades. Imagine devising an entire strategy only to see your platform getting hung up in the middle of the trade!
It is highly recommended to look for a regulated broker who offers a user-friendly and efficient trading platform to you. The most popular among these platforms are the MetaTrader ones, with MT4 and MT5 being at the top of the list. These platforms are available worldwide and come with several tools and indicators that can make trading smoother for you.
Conclusion
Just like one shoe doesn’t fit all, there is no particular currency or currency pair that will suit everyone equally. Some popular currency pairs are easier to trade. This is because they are well-explored as compared to their contemporaries.
If you want to be at the top of the game, accept that you cannot create a good Forex strategy without understanding the importance of economic announcements released by the countries. These announcements can affect the value of a currency. Therefore, you need a good Forex calendar that allows you to keep track of every important news piece.
When you are starting your journey, look for a regulated broker. Ask them for a demo account. This will allow you to check their overall services. You can see how prompt the customer service is and if the platform is user-friendly or not. It will also allow you to experience real-time trading without actually investing any real money.
The last advice applies to tradings types; when you are a beginner, start with small investments and be patient. Forex trading is all about a good strategy and discipline. In the long run, these two help investors and traders more than the actual capital investment. Begin with a small sum, and once you start understanding the market and its various aspects, you can make further investments. Remember, good things come to those who wait.
He is an expert in financial niche, long-term trading, and weekly technical levels.
The primary field of Igor's research is the application of machine learning in algorithmic trading.
Education: Computer Engineering and Ph.D. in machine learning.
Igor regularly publishes trading-related videos on the Fxigor Youtube channel.
To contact Igor write on:
igor@forex.in.rs
