Learn the Best Currency Pair to Trade

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The main purpose of forex trading, also known as foreign exchange trading, is buying and selling currencies which are in pairs. Before diving into the process of buying and selling of currencies, it will first require you to have an idea or information regarding the amount of the paired currencies in terms of the other. This relationship is what makes a currency pair significant. A currency pair consists of abbreviations of two currencies followed by the value of the base currency based on the currency counter.

You should keep in mind that each currency pair is principally the economy of a country. That’s why managing a currency pair can be potentially intricate, because you are going to deal with two major economies and their relationship with each other. The main factors to take into account when picking the best currency to trade include volatility, spread, trading strategy, and the level of difficulty of forecasting the course.

For beginner traders, the most important features of currency are generally the stability and liquidity. You would want to look for a currency pair that swings certainly fair, but it isn’t extremely volatile, and one that has high enough liquidity to trade easily, or have particularly costly spreads.

That said, below are some of the best currency pairs for beginners.

1. EUR/USD

A lot of trading strategies have been refined and perfected with the EUR/USD pair. It’s true that the Euro and Dollar are considered the two largest currencies in the world, and thus it has very high liquidity and stability as well. It is often suggested as the starting place for the beginner trader.

As with many USD trades, this trade can be hedged by other trades such as USD/JPY and USD/CAD. That said, it is commonly a bad idea to start too many trades with USD in the pairs at once; and this is a common mistake of a beginner that can kick him or her out of the game if the price of USD suddenly increases or sharply drops. The dollar is the most traded currency in the world, and other currencies do more significantly in connection to their value to the dollar.

2. USD/JPY

This currency pair is composed of two global powers, the United States and Japan, which creates a good pair for those who look for profit. This pair is extremely liquid. It is the second most commonly traded pair on the foreign exchange market. It is one of the best trading tools for beginners who either want to dive in fast or understand volatility. It is not recommended to place a huge amount of money into USD/JPY until you learned its moves and behavior.

This currency pair is also one of the currency trades that is most often affected by political issues. The JPY is likely to swing up or down fairly sharply compared to the relatively stable USD. That said, the patterns that JPY forms are fairly predictable, based on both time and season, a lot of traders can make quite a lot by knowing and understanding more about its temperament.

3. GBP/USD

This currency pair trades on one of the largest markets in the world, the British pound. It is likely to be fairly predictable. Many foreign exchange traders are known to use support and resistance level trading in order to better comprehend the market with this currency pair.

In fact, it is one of the oldest trading pairs in the world and often referred to as “The Cable” in reference to older technologies that used to carry the day’s trading rates. It is also one of the best starting currency pairs due to its liquidity and support from stable economies. The Euro and the British pound both work virtually similar, so traders may either want to use GBP/USD to hedge EUR/USD or may not want to trade themselves with trading both currency pairs at all.

Conclusion

Choose the currency pair that you can be familiarized yourself with easily so that you can maximize your trading experience more efficiently.


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