Choose the Right Currency
Choose the Right Currency – How to Choose the Right Currency Pair in the Forex Market? Since many countries have their own currencies , there are special pairs for trading. In order to choose it correctly, novice traders need to stick to those currency pairs whose indicators and movements have been studied earlier. Then there is an opportunity to avoid losses due to an unprofitable pair.
The three main currency pairs are the Euro / Dollar pair , GBP / USD and USD / JPY. Each of them has a US dollar. This is due to the fact that the dollar is the most traded currency in the market, the most widely known.
Reasons to use three well-known currency pairs
- All of them are those currency pairs that are widely traded. This type of liquidity ensures that the trader will profit from price changes.
- The US dollar is everywhere, which means that most of the activity will be during New York trading hours.
- As they are extremely popular, the newbie trader will find many online Forex trading systems that can help him successfully use these pairs.
Which currency pairs should you avoid?
Any currency that is considered exotic or unusual is not suitable for novice traders. In some cases, the financial condition of a country is too unstable to read the charts correctly. There is not enough information about others on the network. A beginner trader needs to use as many instruments as possible before making a trade. If he does not know reliable information about Guatemala and its future financial position, he should stay away from trading in unusual currencies.
Instead, you can focus on the following:
- euro (EUR);
- US dollar (USD);
- British pound (GBP);
- Swiss franc (CHF);
- Japanese yen (JPY)
- Australian dollar (AUD);
- Canadian dollar (CAD).
You need to choose one of these currencies, pair it with the US dollar, and then start exploring how this combination works. For a trader, this is the best way to learn how to form strategies using a strong currency pair that provides a large number of trading opportunities.
The novice trader is advised to stay away from currency pairs that have wide spreads. This is the difference between the buy and sell prices. Those with high spreads tend to be more volatile and have long periods when the price will rise. This type of movement is more difficult for a newbie trader, so it is difficult to make a profit with it.
Too many pairs
Traders should start by trading only one pair and become an expert on it before moving on to another. A great option would be to have at least two pairs to look at when actively trading.
EUR / USD
This currency pair is recognized as the best for a beginner trader. These two currencies have historically had the lowest spreads on the market, making them some of the least volatile. Currencies respond correctly to all market rules and indicators that affect profits. It can be considered that this is the safest way to learn how to develop strategies with less risk for the balance of the personal Forex account. In addition, especially regarding the US dollar, they receive constant news, making it easy to track their trends in response to market changes.
USD / JPY
This pair usually has the same low spread as EUR / USD with the same liquidity. Trends are easy to read and usually correspond to other currencies paired with the Japanese yen, giving the novice trader plenty of benchmarks to base their assumptions on.
GBP / USD
Such a currency pair will be useful for an experienced Forex trader. Although easy to track due to the large number of indicators available, it changes significantly faster than EUR / USD and USD / JPY. There are more opportunities for profit from short-term trades, but at the same time there is a huge chance of losses.
What is cross?
A cross is any currency pair that does not include the US dollar. The only cross that is suitable for a beginner trader is EUR / GBP, provided that he has enough knowledge of at least one of the currencies. The spread with this pair is very weak and its trend is the same as that of EUR / USD .
These pairs arise in those countries that have large amounts of valuable natural resources such as crude oil, precious metals and grain. Most often, commodity pairs arise with the currencies of Australia, Canada and New Zealand.