To invest in Forex

Best currency pairs to invest in Forex

There are a large number of currency pairs available for trading in Forex. The first currency of each pair is the one that you buy or sell (base currency = merchandise) and the second is with which you pay (secondary currency = money). Da same badge is your trading account since the change is done automatically and transparently for you. For example, if you decide to buy in the pair EUR/USD (Euro vs. U.S. dollar) you'll be buying Euros paid in U.S. dollars.

When you open a position you're trying to predict how the price according to the strength of a currency of the pair against each other will behave. If you decide to open a buy position is called "go long" and the aim is that the price will increase to close the position subsequently with a sale and collect benefits. Unlike other investment products in which you gain ownership of the instrument in which you are investing and therefore only earn money if its value increases and sell so expensive that when you bought it, Forex also you can negotiate in the opposite direction, i.e. that you can open a sell position if you think that the price will go down "go short" is called, to close later with a buy and reap the benefits.

WHAT ARE THE MOST POPULAR CURRENCY PAIRS ON FOREX?

The four major pairs in the Forex currency market are:

EUR/USD (Euro vs. US dollar)

GBP/USD (British pound Vs American dollar)

USD/JPY (US dollar Vs Japanese Yen)

USD/CHF (US dollar Vs Swiss franc)

The most popular currency pair at the global level is the EUR/USD and is also having a greater volume of operations. It is estimated that approximately 70% of the worldwide Forex market transactions are carried out with this pair. It is therefore having greater liquidity and makes reference to the two most important currencies that are currently in circulation around the world. For this reason, not only is negotiated by retail traders but also for large banks, financial institutions,

There are also other pairs who tend to be very attractive and popular to professional traders such as:

GBP/JPY (British pound vs. Japanese Yen)

EUR/JPY (Euro vs. Japanese Yen)

They are strong and volatile pairs that provide important benefits with the large oscillations of their prices, although they also assume one somewhat greater risk if you are a beginner.

Next, in terms of trading volume, we have other pairs that are the result of crosses of the largest currency that we mentioned before (USD, EUR, GBP, JPY and CHF) with other major currencies (like the AUD Australian dollar, CAD Canadian dollar or the NZD New Zealand dollar). Examples:

USD/CAD (US dollar Vs Canadian dollar)

EUR/GBP (Euro Vs pound sterling)

EUR/AUD (Euro Vs Australian dollar)

EUR/CHF (Euro Vs Swiss franc)

EUR/CAD (Euro vs. Canadian dollar)

GBP/CHF (British pound Vs Swiss franc)

GBP/AUD (British pound Vs Australian dollar)

CAD/GBP (British pound Vs Canadian dollar)

CHF/JPY (Swiss franc vs. Japanese Yen)

AUD/USD (Australian dollar Vs US dollar)

AUD/CAD (Australian dollar Vs Canadian dollar)

AUD/CHF (Australian dollar Vs Swiss franc)

AUD/JPY (Australian dollar Vs Japanese Yen)

CAD/JPY (Canadian dollar Vs Japanese Yen)

CAD/CHF (Canadian dollar Vs Swiss franc)

NZD/JPY (dollar's New Zealand Vs Japanese Yen)

NZD/USD (dollar's New Zealand Vs United States dollar)

NZD/CHF (dollar's New Zealand Vs Swiss franc)

NZD/CAD (dollar's New Zealand Vs Canadian dollar)

Finally we have the exotic currency pairs which have a trading volume lower than those listed so far and a much higher volatility with a consequent increase in the risk to be able to predict their behavior. These pairs include crosses with less frequent currencies or emerging-such as for example the RUB (Russian rouble), MXN (Mexican pesos), SEK (Swedish krona), NOK (Norwegian krone), DKK (Danish krone), HUF (Hungarian forint), ZAR (South African rand), PLN (Polish zloty), TRY (Turkish lira), BRL (Brazilian real), SGD (Singapore dollar).

WHAT ARE THE BEST PAIRS TO MAKE TRADING FOREX?

Especially if you're a beginner trader, the best pairs to make Forex trading tend to be those who have greater liquidity and trading volume. Are mainly for 2 main reasons:

1. These pairs, like EUR/USD for example, usually have a lower volatility and therefore entail a potentially lower risk when operating on them. Usually in these pairs you'll place your stop-loss closer to that point in pairs with higher volatility that may have more sudden movements and therefore force you to place stop loss more far assuming more risk or directly by jump stop loss loss when soon could turn in your favor.

The main couple, say quotes can be more predictable to be influenced by the situation of the large economies around the world and therefore that other smaller economies can keep up more easily with the situation of the European and American markets. You can rely on fundamental analysis (analysis of news and the economic and political situation) to predict the behavior of prices in the medium and long term and also technical analysis (analysis of charts on prices that has been taking the pair) to operate in time periods (weeks, days, hours or even minutes) shorter.

2. The other reason is that these pairs with higher trading volume have a much lower than the other spreads. The spread is the difference between the purchase price and the sale price that the online broker as Commission. Although it is frequent that major pairs have a spread of less than 3 pips (including in some cases below 1 pip), in the case of the couple minor or exotic these spreads are much higher in many cases exceeding the 15 or 20 pips. Whenever you open a position we will start in negative due to this differential and it is certainly much easier to retrieve 1 or 3 pips that 15 or 20. This added to the high volatility of the most exotic pairs make them little recommended for less experienced traders.

WHAT OTHER ASPECTS SHOULD TAKE INTO ACCOUNT WHEN MAKING FOREX TRADING?

-There are some traders who decide to operate only in a specific currency pair which are studied in depth and try to know well. This is a personal decision but in my opinion I don't see too much sense to just a single pair and ignore the opportunities arising in others. Your goal should be the of get your own trading system that is cost-effective and consistent. Detect configurations of trading forts and ignore those that are not, and may have a higher risk.

These strong settings can occur more or less frequently in each pair, and if you focus on a single pair you could spend extensive periods of time without opening any positions. Many times this creates some anxiety and it can make you see strong configurations that are not so since it is difficult to keep waiting because if not you open positions you won't gain nor the experience that gives the practice. But open positions in a hasty and impulsive manner can be finished quickly with your account balance. In the balance is the key and only open positions following your trading system, isolating yourself from your emotions.

-Not all moments are optimal for trading. There are times of the day that have more trading volume than others and therefore greater volatility. For example during the weekend trading volume tends to be scarce and not recommended. To learn more you can take a look at our schedule item to invest in Forex.

It is also advisable to have at hand an economic calendar to be aware of the most important economic news that could affect the currency pairs that we are negotiating. If you use fundamental analysis you can help in these news to try to obtain benefits but, in the event that you use technical analysis, an important news can promptly increase volatility and lead to ruin your strategy, blowing up your stop-loss, Although occasionally also could go in your favor.

-There is some correlation between several pairs of currencies in the Forex market (we will see it more in depth in a later article). This means that some of the major pairs are related positively in its movement of prices and therefore often tend to move in the same direction most of the time, and there are other negatively correlated pairs whose prices tend to move in reverse most of the time. For example two positively correlated pairs are the EUR/USD and GBP/USD, which tend to have a similar trend direction.

You must be careful when opening positions of pairs that are correlated since you are increasing the risk. If the price moves in your favor you can bring you more profit, but it go against your losses will be greater. In these cases if you detect an opportunity to trade in correlated pairs is that you open your position where you have more defined signal and strong.

Your goal to become a profitable trader must be the have your own trading system that will allow you to detect good opportunities for trade and to properly manage your risk level. This is achieved with lots of practice and experience. The best way to begin practicing without risk is to open an account demo. You can also be consulted on the internet thousands of different trading strategies that you can try and scan but it is finally that you have your own strategy with which you feel comfortable, go debugging it and that you trust.

Many times the best strategies are the simplest. Any complex system will be much more difficult to understand, follow and execute correctly. Starting to learn about technical analysis the majority of people start to try many indicators and use them at the same time, without too much discretion, to try to get more information but messages you can get are often contradictory and confusing.