Stick to these core currency pairs and master my price action trading strategies and you will be well on your way to becoming a successful Forex trader. Stay tuned for next week’s follow-up to this article where we will discuss the best times to trade the Forex market. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider.
Industrial, employment, and inflation data (as well as BoE inflation letter), interest rate decisions by BoE influence the direction of the GBP/USD currency pair the most. It’s recommended to trade this currency pair if you have some experience and flexibility to the market changes – consider intraday, position, or swing trading. Economic Data – Economic releases are reports that give traders a glimpse into the performance of a nation’s economy. The EUR/USD (Euro/US Dollar) nicknamed ‘Fiber’ is the world’s most traded currency pair commanding 23% of FX transactions in 2016.
Since oil is priced in US dollars on the world markets, Canada can earn a large supply of US dollars through its oil exports. As such, if the price of oil rises, it is likely that the value of the Canadian dollar will strengthen compared to the US dollar. A slump in the value of these commodities on the world market would likely cause a reciprocal slump in the value of the Australian dollar. In the case of the AUD/USD currency pair, this means the US dollar would become stronger, so it would cost fewer US dollars to buy one Australian dollar. In general, the more economic growth a country produces, the more positive the economy is seen by international investors. Investment capital tends to flow to the countries that are believed to have good growth prospects and subsequently, good investment opportunities, which leads the country’s exchange strengthening.
- Professional Forex traders know not to trade if they lack focus or have just had a row with their partner.
- Not surprisingly, all of these pairs contain the US dollar – due to the sheer size of the US economy.
- GBP/USD can still be a very interesting trading pair — though it is best left to experienced investors when looking to trade both the GBP/USD and EUR/USD simultaneously.
- With so many Forex Pairs to chose from its important to pick the right pairs you want to focus on.
- However, beginners should focus on around one to three pairs and aim to master those pairs before looking to expand their coverage.
Volatility can strike any of these pairs at any time due to abrupt changes in interest rates, drastic changes to the economic outlook, or political instability. It is important to follow these markets dedicated pages above for up to date news and analysis. The USD/JPY (US Dollar/Japanese Yen) is also known as ‘The Ninja’ and is the second most traded currency pair. The Yen is often used by carry traders who borrow the Yen and invest it into higher yielding currencies.
The 2nd major influence on the price of GBP was Brexit, the name given to the 2016 vote that would separate Britain from the European Union. Brexit caused the value of the GBP to lose almost 10% overnight and 20% in the months following the vote as investors abandoned the pound for more stable currencies in the wake of negotiations. The GBP is the 3rd most-traded currency, trailing behind the USD and the EUR.
Best currency pairs summed up
It is important to note that between 74-89% of retail investors lose money when trading CFDs. These products may not be suitable for everyone, and it is crucial that you fully comprehend the risks involved. Prior to making any decisions, carefully assess your financial situation and determine whether you can afford the potential risk of losing your money. Experienced traders can make money by watching the markets closely and trading a mix of major, minor and exotic pairs, but most new traders will start with the more common pairs. With approximately 180 legal currencies in circulation, there is plenty of scope to buy and sell both real and virtual currencies. As a private forex trader, you can easily trade any of the currency pairs that your broker offers.
Understanding Forex Currency Pairs
So, let’s cut straight to the chase and take a look at the 4 best currency pairs to trade today. We’ll also show you how to choose other currency pairs should you want to https://traderoom.info/ broaden your trading options. Traders should also be aware that many forex platforms will, by necessity, have larger buy-sell spreads on most currency pairs overnight.
The Exotic currency pairs have poor liquidity and volatility and are from emerging economic nations like Brazil. Due to the lack of liquidity, we won’t be featuring the exotics in the top 10 Forex currency pairs to trade. The majors are popular with Forex traders because liquidity and volume are good.
During periods of high volatility, the price of this pair is likely to fall as the CHF increases in value versus the USD. Exotics connect a major currency, such as the US dollar or Euro, with a developing country’s currency, such as Brazil (Brazilian Real) or Turkey (Turkish Lira). Because these pairs are less frequently traded than majors or minors, they tend to be illiquid, can often be extremely volatile and therefore have wider spreads.
How Many Currency Pairs Should I Trade?
EUR/USD is reactive to economic news, especially the monthly non-farm payroll announcement on the first Friday of each month. AUD/USD is an excellent currency to trade because the price action is responsive to price zones, creating patterns of interest for high probability trades. One of the reasons was studied thoroughly by Daniel Kahneman and is known as Prospect Theory. Too often, traders will sit on losing trades for too long and close down winning trades too early. This causes traders to miss out on further gains while exposing their account to additional losses.
What Currency Pair Should I Trade in 2022?
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result.
GBP/USD: Trading the “Cable”
No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own crypto trading platform in 2023 risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it.
This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it. Learn what makes countries unique in order to predict which currencies will rise and fall in value based on current economic or political climates. Meet other traders, research online and travel to understand the world. Don’t be afraid to invest in a currency in use halfway across the world.