Forex trading is an exciting way to make money, but it can also be a daunting task, especially for beginners. One of the crucial decisions you need to make before starting your trading journey is selecting the best currency pairs to trade. The forex market is vast, with numerous currency pairs available for trading, but not all of them are equal. In this article, we will discuss some of the best currency pairs to trade forex.
The major currency pairs
The major currency pairs are the most popular in the forex market. They include the US dollar, euro, Japanese yen, British pound, Swiss franc, Australian dollar, and Canadian dollar. These currencies account for most of the trading volume in the forex market, making them the most liquid currency pairs. As a result, they offer tight spreads, making them ideal for day trading.
The EUR/USD is the most popular currency pair in the forex market, accounting for 20% of daily trading volume. It is the most liquid and volatile pair, making it ideal for day traders who want to make quick profits. The USD/JPY is another popular pair, representing the second most traded currency pair in the forex market. It is also highly liquid and volatile, making it suitable for day trading.
The GBP/USD is another popular currency pair, representing the third most traded currency pair in the forex market. It is also highly liquid and volatile, making it a good choice for day traders. The AUD/USD and USD/CAD are also popular currency pairs, representing the fourth and fifth most traded pairs in the forex market, respectively.
Exotic currency pairs
Exotic currency pairs are those that include lesser-known currencies, such as the Mexican peso, Turkish lira, and South African rand. These currencies are not as liquid as the major currency pairs, making them more volatile and prone to sharp price movements. As a result, they are not ideal for beginners, but experienced traders can take advantage of their volatility to make profits.
The USD/MXN is one of the most popular exotic currency pairs, representing the exchange rate between the US dollar and the Mexican peso. The pair is highly volatile, making it a great choice for experienced traders who can handle its fluctuations. The USD/TRY and USD/ZAR are also popular exotic currency pairs, representing the exchange rates between the US dollar and the Turkish lira and South African rand, respectively.
Cross currency pairs
Cross currency pairs are those that do not include the US dollar. They include currency pairs such as the euro/Japanese yen, British pound/Japanese yen, and euro/British pound. These currency pairs offer unique trading opportunities as they are not affected by the US dollar’s movements. As a result, they are suitable for traders who want to diversify their trading portfolio.
The EUR/JPY is one of the most popular cross currency pairs, representing the exchange rate between the euro and the Japanese yen. The pair is highly liquid and volatile, making it ideal for day traders. The GBP/JPY and EUR/GBP are also popular cross currency pairs, representing the exchange rates between the British pound and Japanese yen and euro and British pound, respectively.
Conclusion
Selecting the best currency pairs to trade forex can be a daunting task, but it is crucial to your success as a trader. The major currency pairs are the most popular and offer tight spreads, making them ideal for day trading. Exotic currency pairs are more volatile and offer unique trading opportunities, but they are not suitable for beginners. Cross currency pairs are not affected by the US dollar’s movements, making them ideal for traders who want to diversify their trading portfolio. Ultimately, the best currency pairs to trade forex depend on your trading strategy, risk tolerance, and experience as a trader.
