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What par you should and should not trade in forex?

Forex trading is one of the most lucrative investment opportunities that exist today. However, to succeed in forex trading, you need to have a clear understanding of the par you should and should not trade. In this article, we will provide an in-depth explanation of what par you should and should not trade in forex.

What is a Forex Par?

A forex par, also known as a currency pair, is the quotation of two different currencies traded in the forex market. For example, EUR/USD is a forex par, where EUR is the base currency and USD is the quote currency. The price of a forex par is quoted as the amount of quote currency required to purchase one unit of the base currency.

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What Par You Should Trade in Forex

The par you should trade in forex depends on your trading strategy and risk tolerance. However, there are some general guidelines that you can follow to increase your chances of success in forex trading.

1. Major Currency Pairs

Major currency pairs are the most popular forex pairs and account for the majority of trading volume in the forex market. The major currency pairs include EUR/USD, USD/JPY, GBP/USD, USD/CHF, AUD/USD, and USD/CAD. These pairs are highly liquid and have low spreads, making them ideal for traders of all levels.

2. Volatile Currency Pairs

Volatile currency pairs have high volatility and can experience significant price movements in a short period. These pairs include EUR/JPY, GBP/JPY, AUD/JPY, and CAD/JPY. While they are riskier than major currency pairs, they offer higher profit potential for traders who can manage their risk.

3. News-Driven Currency Pairs

News-driven currency pairs are those that are heavily influenced by economic news releases and events. These pairs include USD/CAD, USD/JPY, and GBP/USD. Traders who closely follow economic news releases can use these pairs to make profitable trades based on market sentiment.

What Par You Should Not Trade in Forex

While there are many forex pairs to choose from, some should be avoided due to their low liquidity or high volatility.

1. Exotic Currency Pairs

Exotic currency pairs are those that include currencies from emerging markets or less developed economies. These pairs include USD/ZAR, USD/MXN, and USD/TRY. While they offer high profit potential, they are also highly volatile and have wider spreads than major currency pairs.

2. Low Liquidity Currency Pairs

Low liquidity currency pairs are those that are not heavily traded in the forex market. These pairs include EUR/NOK, EUR/SEK, and USD/SGD. Low liquidity pairs have wider spreads and are more difficult to trade than major currency pairs.

3. Highly Correlated Currency Pairs

Highly correlated currency pairs are those that have a strong positive or negative correlation with each other. These pairs include EUR/USD and USD/CHF, and GBP/USD and AUD/USD. Trading highly correlated pairs can lead to increased risk and lower profit potential.

Conclusion

In conclusion, the par you should and should not trade in forex depends on your trading strategy and risk tolerance. Major currency pairs and volatile pairs are ideal for traders of all levels, while exotic pairs, low liquidity pairs, and highly correlated pairs should be avoided. As with any investment, it is important to do your research and carefully consider your options before making a trade.

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