A lot of currency pairs are available for trading in the forex market. Each currency pair has its own characteristics, which should be taken into account when trading. What currency pairs are better for trading on Forex?
What is the currency pair? Currency pair is a financial instrument formed by two currencies. The base currency stands first in the currency pair, and the quoted one stands second. So, the EUR/USD currency pair consists of the base currency (EUR), which is sold or bought for the quoted currency (USD).
The most popular pairs are EUR/USD, GBP/USD, USD/JPY. They have a high liquidity and the largest trading volume in the foreign exchange market. In addition, trading on the EUR/USD currency pair, as a rule, has fewer slippages and lower spread.
What to pay attention to when choosing a currency pair?
- Volatility. Pairs with low volatility are a win-win option for starting trading. Among such pairs are EUR/GBP, AUD/USD, USD/CHF. They are being traded relatively calmly. But such pairs as GBP/JPY, GBP/USD, EUR/JPY have sharp movement dynamics within a day. It is better for novice traders to avoid trading these pairs, as they are quite unpredictable.
You can find the current market volatility of currency pairs at the popular service MyfxBook.
- The time of the greatest activity. Each currency pair has its own time, when it is active the most. Therefore, it is recommended to use the currency pair that is active during a certain trading session. For example, during the Asian session, the most traded currency pairs are AUD/USD, USD/JPY.
- Spread. Before starting trading, a trader needs to know the spread of the current instrument. Currency majors (EUR/USD, GBP/USD, USD/JPY) have the smallest spread, as this currency pairs are liquid.
- Liquidity. The more popular currencies are, the higher the liquidity of the instrument is. So, orders can be executed fast at the current market price. Also, the size of the spread depends on liquidity. Liquid pairs are characterized by smaller spread and fast execution of orders.
- Predictability. The behavior of some currency pairs is easier to predict in the near future using technical and fundamental analysis. It is more profitable to trade the currency pair movements of which are analyzed the best.
For more efficient and profitable trading, brokers provide analytics. The JustForex Analytics section consists of market overview, technical analysis, market news, economic calendar and daily forecast, where the analysis of currency majors is published.
