There will be one answer that is the Foreign Exchange Market (Forex). There is a famous movie named 'Wall Street' in that movie there is a great saying that 'money never sleeps'. No matter what time you are in there will be transactions 24 hours of the working day. This market has the capacity to facilitate the exchange of major currencies from all over the world. As a result, it is the center of attention of all the major actors.
In the forex market, there is a trade-off among two major currencies pare of two different currencies. When you will trade online you will be surprised by yourself with the number of currencies available in the Meta Trader terminal. Now the question is what is the best currency to trade. There is no specific answer. It varies from trade to trade. Through trial and error, you have to find out which currency is best for your strategy. This article is going to explaining different currency pairs and it will help you which currency pair is best for your strategy. It will also explain what are the major currency and what are the minors.
What are Currency Pairs?
Forex is all about buying and selling currencies in pairs. To get in this business you need to know each pair’s relative price. This relevant price defines the currency price. A currency pair is named after two currency abbreviations. One of them is considered as the base currency. There is an international code that determines the currency price. As an example, if we say EURUSD 1.29 that means the price of the euro is 1.29. The first currency (Euro) is considered as base currency the other (US Dollar ) is considered the counter currency. Each of these currencies pares is listed in all the markets around the world.
What are the Best Currency Pairs to Trade?
With over 200 countries in the world, you can find a handful of currency pairs to engage with trading. But there is no surprise that the US Dollar is the most dominated, strongest and widely traded currency in the world. The reasons are because of the big size of the US economy and its political influences. As a result, it is preferred as a reference point for most of the currencies in the world. If we look at the reserve currency, the US Dollar is the most used one after gold. The following currency might not be the best currency pares for trading but these are one which has high liquidity.
The currency pares keeps fluctuation in relation to each other as the amount of money keeps changing from one currency to another currency. The price also has relations to the financial power and trade volume of a country. So the price is the most volatile one which fluctuates. So does it make the best currency? No, a trader can either make money or lose money on this fluctuation. The rest of the currency pares have low volatility compared to the first one.
Analysis of the Best Currency Pairs to Trade
Let's take a look at the currency pairs below:
USD/EUR is said to be the most popular currency pair. On top of that, the spread is very low for Forex brokers. This USD/EUR is closely related to the Technical Analysis. This currency is not too volatile that is the best thing about it. If you want to avoid risk then it can be the best currency pair for you because it will not cause much doubt in your mind. You can get lots of news regarding this pare which can help you to avoid novice mistakes.
USD/GBP – This currency pare Profitable pips and it has a big change in price which contributes to the popularity of this currency. But at the same time, you should keep in mind that large profit comes with a big risk. We can put this currency into the volatile category. Whatever some traders with risk-taking attitude and good knowledge of this currency feel comfortable to trade.
USD/JPY – This is another popular currency which is very popular in the Forex market. Generally, it has low spread and if you compare it with other currency you will find a smooth trade in this currency. It also has a lucrative opportunity to trade. Most of the currency you will find with a tight spread in the international market. But you can’t apply this to USD/GBP because of the volatility. It is better to avoid currency with a high spread. The recommended spread should be around 0-3 pips. When it exceeds 6 pips it becomes expensive that can cause greater losses.
Special Pairs (Or Exotic Currency Pairs)
So, what is the best currency pair? The currency you know best is best for you to trade. It will be very useful to you if you can trade in your local currency.
Because you collect batter knowledge (political and economic issues) about the currency. But if your local currency is not included in the major one, the US dollar could be the best counter currency.
You can collect Forex-related information from the Forex calendar, which also lists predictions and forecasts regarding the major currency pair.
If you feel confident, it is also recommended to consider trading the pairs that contain your local currency (also known as 'exotic pairs'). In those cases, your local currency pair will be countered against USD so you would need to stay informed about this currency as well.
The changing aspects of foreign exchange trading is an interesting subject to study, as it can provide a boost to the global economy with the rise and fall of financial fortunes. As globalization has become more and more border less. You should be informed about the most pressing issues around the world, the response of these pairs is closely interconnected. Make sure you study the foreign exchange market extensively before you invest there. There are many Forex pairs available for trading and we highly recommend you to study before you choose a particular one to deal with.
As Forex trading is risky, try it first on a Demo account with a realistic balance which means most traders use million dollars to trade but in reality, they might have 100 dollars to trade. Another reason is when you are in demo account time pressure works on the other hand when you use real account then emotions and real pressure works. So identifying the best currency pair to trade is not easy. The best way to accomplish this is through hands-on experience.