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What is the best currency pair for trading Forex?


Jane Goodwin

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If you’re new to trading you might want to start with one of the Major currency pairs. Even among this small subset of the most traded global currencies a cursory glance at historical data shows the different nature of each currency. It’s very much a case of researching the nature of the currency pairs and deciding which one suits you best. The different type of price action is reflected in the charts below taken from the AVA Trade site and showing only a couple of weeks of 1H data. Sterling: GBPUSD 4 Jan – 16 Jan 2018 1H Candlestick pattern Volume indicator and 14 day standard deviation Source: AVA Trade Demo account Yen: JPYUSD 4 Jan – 16 Jan 2018 1H Candlestick pattern Volume indicator and 14 day standard deviation Source: AVA Trade Demo account Kiwi:  NZDUSD 4 Jan – 16 Jan 2018 1H Candlestick pattern Volume indicator and 14 day standard deviation Source: AVA Trade Demo account You’ll notice over the same time span the nature of the price moves was different for each currency pair. The hourly candles of the JPYUSD chart typically had greater price volatility than those of NZDUSD as does the 14 day standard deviation (green line). These three charts are taken from the subset of currency pairs called the Major Currencies, this group noted for seeing the highest trading volumes and tightest bid/offer spread. The below graphic from Markets.com not only lists them but once again the 6H trend line highlights the different price action seen by each of the pairs: Source: markets.com Minor currency pairs that you might want to study, and trade include: Source: markets.com Trading the Exotic currency pairs is a different experience again, see below: Source: markets.com The below chart of USDRBL is an example of what happens with Exotics:  more gaps, wider spreads and lower liquidity which in turn tends to bring greater price volatility. Trading may be restricted or ‘market open’ hours limited, so depending on what broker platform you are signed up with the choice of whether you trade these pairs may even be taken out of your own hands. It’s important to reflect that the volume in the market is fundamentally based on the economic activity between two countries and the people and organizations in those two countries desiring to exchange their own currency for the other. Lower levels of business activity will mean a less liquid market. USDRUB Daily candle chart Source: markets.com Even the Major currency pairs demonstrate a wide range of characteristics. Whilst there might be a particular Exotic pairing which experiences price action that complements your trading resources, strategy preference and lifestyle, it’s hard to argue against the advice that those new to trading should stick to the Majors. There is a viewpoint that it is also of benefit to stick to trading one particular currency pair. Currency trading can be time-consuming and many experienced and profitable traders specialize in just the one; forsaking opportunities elsewhere to concentrate their resources. This again is good advice for the newbie but if you’re a trader that looks for trends rather than scalps you’ll likely be trading whatever pair has the strongest underlying movement. Even some of the Major currencies are avoided; for example some seasoned traders avoid trading CHF pairs on the grounds that the Central Banks’ habit of making dramatic announcements distorts the market.
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