If you are a Forex enthusiast, it is good that you came across this article. Why? Because many beginners will often fall into the trap of trading any currency pair, they see before thinking a bit more and analyzing what would be the best for them and the easiest. We hope after this read, this won’t be the case with you.
Choosing a currency pair is never easy. There are many characteristics to every pair, and you have to pay attention to the volatility, how predictable the pair is, and many more, which we will explain further. We will analyze a couple of the most popular pairs and see which one would be the best for you, dear beginner.
What is a currency pair?
A currency pair is made of two different currencies that are traded in the Forex market
When you place an order for a currency pair, the first listed currency or base currency is the that you’re buying and the second listed currency in a currency pair or quote currency that you sell.
The EUR/USD currency pair is thought to be the most liquid, while The USD/JPY one of the most popular currency pairs worldwide.
You can probably assume (and be right!) that this is the most liquid spread, and therefore the most traded worldwide. Popular doesn’t mean predictable, though. Almost everyone trades this pair – from big companies to small traders. That is why many fluctuations occur, and then it becomes difficult to predict further movements, even in a day. It is best to follow your trading strategy if you want to gain from this currency spread. It is not best for beginners, but it is worth mentioning, so you don’t think it’s super easy to trade with, just because it looks so familiar.
As you get deeper into Forex, you will come across a term called “cable.” This is because of the connection and overlapping between the NY stock exchange and The London Stock Exchange (historically speaking). The GBP/USD currency pair is always popular because of its movements – strong and straight. Still, they are very dependable on the EUR/USD changes.
This currency pair is usually recommended for medium difficulty traders, so you should have a long talk with your broker if you want to invest in it. The GBP/USD makes strong signals every time before a trend begins. This is very exciting for short-term traders, but ironically, the pair itself is far better for long-term trends since it can always start moving in a different direction.
This is a super popular currency pair on Forex. It’s the most unpredictable and can bring you big wins but huge losses as well. Why is it so popular then? If you get familiar with how the currency pair functions in general, you can recognize its patterns and then create opportunities. This pair relies a lot on world events (between the US and Japan especially), but it rarely moves without significant corrections.
The USD/CHF currency pair is very suitable for beginners since it’s much more predictable than we mentioned. Beginners should be ready to analyze the pair because it can help them immensely to determine how other pairs will move. This pair often goes the opposite from EUR/USD (and they both are considered major in Forex), but its liquidity is better.
CHF/JPY is surprisingly very simple for beginners. It’s easy to predict, and it moves fast and early. That means you need less time to make a good trade.
So what should you choose?
The answer lies in your strategy and which type of trader you are. Do you like excitement or patiently waiting? That’s how you decide on with which currency pair you want to trade.
For every currency pair, we can give you pros and cons, and that’s why it’s hard to pick the one that is the best for a beginner. We can only give you a piece of advice that we mentioned before, and that is never to invest more than you think you can lose, and don’t open more than two, maximum three pairs at the same time. That’s how you can get familiar with a currency pair and become smarter about trades.
What you should pay attention to when trading
Time frames are really important, and they can give you more opportunities during a trade. Once you have set a trading plan, that should also fall into place. Considering Forex is operating 24/7 from Monday to Friday, it is entirely up to you to choose when you want to trade without any pressure. The best choice for beginner traders is to carefully choose the currency, see if it’s something that interests you in the long run, and don’t rush the process.