The foreign exchange market, or forex, is the largest financial market in the world with a daily turnover of over $5 trillion. This market is open 24 hours a day, five days a week, and allows traders to buy and sell currencies from all over the world. With so many currency pairs available, it can be difficult for traders to decide which pair to trade. In this article, we will explore the best pairs to trade in forex and why they are considered the best.
Before we dive into the best pairs to trade, it is important to understand the concept of currency pairs. In forex trading, currencies are always traded in pairs. This means that when a trader buys one currency, they are simultaneously selling another currency. For example, if a trader buys the EUR/USD pair, they are buying the euro and selling the US dollar.
There are three main categories of currency pairs: majors, minors, and exotics. The majors are the most widely traded currency pairs and include the US dollar, euro, Japanese yen, British pound, Swiss franc, Canadian dollar, and Australian dollar. The minors, also known as cross currency pairs, do not include the US dollar and are less frequently traded. The exotics are currency pairs that include one major currency and one currency from an emerging market country. These pairs are even less frequently traded and can be more volatile.
Now let’s explore the best pairs to trade in forex.
1. EUR/USD
The EUR/USD pair is the most widely traded currency pair in the forex market, accounting for approximately 28% of all trades. This pair is popular due to its liquidity, tight spreads, and low volatility. The euro is the base currency, while the US dollar is the quote currency. The EUR/USD pair is heavily influenced by economic data from both the European Union and the United States, making it a good pair for traders who want to stay up-to-date on global economic events.
2. USD/JPY
The USD/JPY pair is the second most traded currency pair in the forex market, accounting for approximately 13% of all trades. This pair is popular due to its liquidity and low volatility. The US dollar is the base currency, while the Japanese yen is the quote currency. The USD/JPY pair is heavily influenced by economic data from both the United States and Japan, making it a good pair for traders who want to stay up-to-date on global economic events.
3. GBP/USD
The GBP/USD pair, also known as the cable, is the third most traded currency pair in the forex market, accounting for approximately 9% of all trades. This pair is popular due to its liquidity and volatility. The British pound is the base currency, while the US dollar is the quote currency. The GBP/USD pair is heavily influenced by economic data from both the United Kingdom and the United States, making it a good pair for traders who want to stay up-to-date on global economic events.
4. AUD/USD
The AUD/USD pair, also known as the Aussie, is the fourth most traded currency pair in the forex market, accounting for approximately 7% of all trades. This pair is popular due to its liquidity and volatility. The Australian dollar is the base currency, while the US dollar is the quote currency. The AUD/USD pair is heavily influenced by economic data from both Australia and the United States, making it a good pair for traders who want to stay up-to-date on global economic events.
5. USD/CHF
The USD/CHF pair is the fifth most traded currency pair in the forex market, accounting for approximately 4% of all trades. This pair is popular due to its liquidity and low volatility. The US dollar is the base currency, while the Swiss franc is the quote currency. The USD/CHF pair is heavily influenced by economic data from both the United States and Switzerland, making it a good pair for traders who want to stay up-to-date on global economic events.
In conclusion, the best pairs to trade in forex are the ones that offer liquidity, tight spreads, and low volatility. The five pairs mentioned above are the most widely traded currency pairs in the forex market and offer traders the opportunity to stay up-to-date on global economic events. It is important for traders to do their own research and analysis before making any trades, as the forex market can be unpredictable and volatile.
