In this article, we will talk about choosing which Forex pairs to trade. There are more than 50+ currency pairs that you can trade. But, you should not trade all of them. We ourselves only trade 6 currency pairs. Mostly the major currency pairs and some cross-currency pairs.
Exotic currency pairs
When it comes to forex trading, it’s crucial to have an understanding of the different currency pairs. Traders need to have an understanding of each pair so they can properly analyze the market.
Exotics are traded less frequently than major currencies, which means there are fewer traders in the market. Exotics move in real time when they break a barrier of support or resistance. Once the pair breaks through a barrier, traders can use the next level of support or resistance.
The major currencies tend to move more slowly, but if you want to play the big moves, you’ll need to know about these currency pairs and the best time to trade them.
Some exotic currency pairs have a lower liquidity level than others, which means they’re less liquid. Since traders have less access to these pairs, they’re likely to experience exposures that they aren’t used to. One example is the USD/MXN pair, which started to behave like a proxy for Donald Trump’s prospects in the presidential election.
The commotion was caused by concerns about a Republican victory in the United States, and the Peso became more sensitive to the election than any other currency.
While there are major currency pairs in the market, there are many more exotic currency pairs that can be traded.
The EUR/JPY pair, AUD/CAD pair, and GBP/CHF pair are all examples of exotic currency pairs. Using these pairs can be a profitable strategy when you’re trading on a daily basis. Traders can profit when the majors aren’t moving. You can even trade cross-currency pairs to make a profit if you’re not trading the major currencies.
Another pair that’s seen high volatility is the Australian dollar against the Japanese yen. The Australian dollar is a commodity currency, which is linked to the country’s exports. It’s important to keep in mind that both currencies’ prices fluctuate depending on the outlook of global economics.
But in general, the AUD/MXN pair has experienced volatility in recent months and has been moving up and down relative to one another since the mid-1990s.
Major currency pairs
The Majors are the most commonly traded currency pairs. They comprise the largest share of the foreign exchange market and exhibit high liquidity. Each of these pairs has a different price range, but they all have some important similarities.
These currencies are traded at high volume and have tight spreads. This means that investing in them is a profitable investment. Major currency pairs are popular investments, but it is also important to note that not all major currency pairs are equal.
The trading of these currency pairs is based on long positions and short positions. For example, a trader who believes that the euro will rise will buy the euro against the dollar. This is known as going long. For every pip the euro rises against the dollar, the trader will gain profit.
The opposite is true for the other currency pair. Traders who think the dollar will drop will sell their currency. This is called short-selling.
The second-most popular pair is the USD/JPY. While the US dollar is the base currency in all three pairings, political tensions in the Far East have been a contributing factor in this pair’s volatility. Meanwhile, the relationship between the British pound and the euro has been a source of concern for investors.
The GBP/USD pair has a positive correlation with EUR/USD but a negative correlation with USD/CHF. Those two pairs, in particular, have seen a significant increase in volatility since June 23, 2016.
Those with a higher risk tolerance should avoid trading exotic currency pairs. Although EURTRY is a relatively mild currency pair, it carries a high level of risk, and trading it can result in higher capital and exposure.
Therefore, traders should only choose a few of the more liquid currencies. This will minimize risk and allow them to invest more profitably. The ZARJPY is another example of a mild pair that has a low-risk profile.
In the foreign exchange market, currency pairs are the most widely traded. Some of the most common currency pairs are EUR/USD, USD/JPY, GBP/USD, USD/CHF, AUDUSD, NZDUSD, and USD/JPY. However, the exact number of currency pairs is not known. A list of all major currency pairs is available on the NASDAQ and FX Markets.
Less volatile currency pairs
If you want to trade the currencies of different countries, you should try trading in less volatile currency pairs. They tend to move slowly and quietly, and sometimes seem to do nothing at all. Volatility is a measure of how risky a currency pair is.
The currencies with less volatility are not as appealing to day traders as those with higher volatility. This means you can take your time and trade at your own pace. Less volatile currency pairs are more likely to move in your favor if you have more time.
In order to trade successfully, you need to learn how to analyze price patterns and trends. If you understand technical analysis, you can spot potential reversal points and make money. Proper identification of these points can mean the difference between profiting and losing money.
Fortunately, this technique is available on less volatile currency pairs. You can learn the fundamentals of technical analysis for free from various online trading schools and software programs. However, you should not rely solely on these free tools.
In order to trade currency in forex markets, you should focus on currency pairs from major countries. These are usually the most liquid and highly traded pairs. These currencies are generally from large, developed countries.
They attract higher trading volumes and are therefore more stable. EUR/USD, USD/CHF, and GBP/USD have high liquidity. These are the best currency pairs to trade when you are looking for a less volatile pair. You should also consider trading in currency pairs with emerging market countries.
The currency pair that is more volatile will have a wider spread than those with less volatility. You can also check out the volatility of the currency pair by checking the average true range, and the percentage of the spot price. The larger the volatility, the greater your risk.
You should trade only small amounts of currency in order to minimize risk and maximize return. You can start out by trading in less volatile currency pairs with small amounts. Just remember to always trade responsibly and use your best judgment.
Trading strategies based on volatility
The most volatile currency pairs tend to make large moves. This makes the volatility of a currency pair an important risk factor to take into account when developing a trading strategy. However, volatility can be used to your advantage.
By using technical analysis, you can choose high-volatility currency pairs and minimize the risk of losing a lot of money. Volatility can also be influenced by big news events. If you know what is coming out about the economy, you can check out a currency’s economic calendar to keep yourself up-to-date.
Volatility is a statistical measure of the amount of change in the value of a currency during a given time period. It allows you to customize your trading time and system to maximize profit and minimize risk.
Low-volatility currency pairs are ideal for those who aim for low returns and a low level of risk. High volatility pairs are best for those who are willing to take a higher level of risk. Ultimately, volatility is a very personal choice, so you need to understand how much risk you’re comfortable with taking.
One way to calculate volatility is by using the standard deviation of variance (SDV). This is the standard deviation of a currency pair over a given period of time.
To calculate SDV, you need to add the price change from a given day and divide it by the number of days. If the SDV is greater than the SDV, then the volatility is higher than expected. By using volatility as a guide, you can set your stop-loss and target price.
Currency pairs that have higher volatility are often riskier. Traders should consider decreasing the size of their position size if they plan on trading these high-volatility currency pairs. Alternatively, they should use low-volatility currency pairs such as EUR/JPY or USD/JPY.
You should always be careful when using volatile currency pairs, however. As long as you’re confident about your trading skills, you’ll be successful in the forex market. According to Investopedia, there are 18 different currency pairs that have very high liquidity.
Top Forex Brokers
[ninja_tables id=”6695″]
Conclusion – Choosing Which Forex Pairs To Trade
Major currency pairs are usually the best to trade in the forex market. Some cross-currency pairs are great too. But we recommend that you start trading with the major currency pairs like EURUSD, USDJPY, and GBPUSD.
If you are interested in learning how to trade in the forex market, we recommend you to check out our learn forex guide which is completely free.
