Best Forex pairs to trade are less volatile and highly liquid. They are stable and their small movements give you a chance to have clear setups and strategies.
Depending on different fundamental factors surrounding different economies, these currencies also behave differently.
Despite this behavior on the forex market, you can always find a best forex pair to trade.
However, you need to consider different factors to say that a certain pair is actually good to trade.
So, What is the best forex pair to trade? What do most traders trade? What currency pair is worth trading and why?
So what are the best forex pairs to trade?
One of the biggest mistakes many new Forex traders make is, not understanding that deciding correctly what to trade contributes a lot on profitable trading.
Each currency pair has its own “personality” so you should get a lot of experience trading a few pairs and get to know their personalities well. This way, you will know what to trade and when to trade them.
choose what currency pair to trade and the time frame you use.
Different forex pairs behave differently due to different economic factors and so it’s important for beginners to put much emphasis on currency stability and liquidity.
Choose a currency pair,most traders trade. Such pairs are not easily manupilated and have small spreads. This way you avoid high transaction costs.
Some forex pairs are good at forming clear and strong swing price movements. It is easy to identify trade setups in relation to your strategy.
Currencies under this category are especially the major and minor currency pairs.
They are also known for obeying the levels of support and resistance. When trading these currencies you can easily determine your entry and exit points using support and resistances.
What do most traders trade? and why?
Most traders trade major forex pairs in the market. These are currencies from highly developed economies such as U.S.A, Europe, Canada, Great Britain, Australia, Japan and Switzerland.
The major pairs are pairs with U.S. Dollar in a quote. The pairs of the other currencies except the U.S. dollar are the minors/cross pairs.
The majors are less volatile and highly liquid. They are stable and their small movements give you a chance to have clear setups and strategies.
EUR/USD – forex pair to trade
The Euro and the U.S. Dollar.
This is the most popular forex pair to trade in the market. It has the lowest spread compared to other currencies . In addition, it is highly liquid, less volatile, more stable in the economy.
The fact that, it is not too volatile, it is the best pair to consider If you are not in a position to take any risks
. It is also easy to find a lot of information on this currency pair. This will prevent you from making rookie mistakes.
EUR/USD has a low bid and ask spreads and always available even for large traders. it is also good for long term traders because it is less volatile.
In addition to its stability, it has good swing movements therefore a bit easy to predict and trade.
More so, it’s easy for traders to analyse and create trading strategies that are dependable.
As we go deeper into the sessions, you will be able to learn how to formulate your own winning trading strategies. But Now let’s look at an example showing EURUSD movements.
easy& good price swing is shown by best forex pairs to trade.
The chart below illustrates price movement of a EUR/USD on 4-Hour time frame.
Figures 1 to 8 show different formations that can be used as entry and exit points. The circles help us to identify swing movements of the pair following the arrows.
So! looking at these formations you can easily tell where price is likely to go in future. You can easily identify potential opportunities to trade and make profits.
Do you see any patterns? I hope so. I know all this is new before you but as we go through our next sessions, you will get more familiar with every thing you see.
For now, we are just taking you through the introduction on how some currency pairs behave on the charts.
Explanation for Chart above
If you were to trade this pair, you would buy at formation 1, exit at 2 or sell at 2 then exit at 3. Or else, take a buy again at 3 exit at 4, or sell at 4 exiting at 5.
From 5 to 7 you can tell from the chart that there is a very strong move . This is because we have two strong formations one at 5 and the other at 6 all pointing in one direction giving you a strong signal to buy. At formation 7 you can exit trade.
If you observe the chart very well, you will realize that the identified formations circled in black have clear and significant meaning on the direction of the trend. You will notice that wherever these formations appeared price changed direction.
If you hadn’t noticed that, you can scroll up and check again. This assures us that such a formation can be relied on to gauge the future direction of the market.
These are some of the technical strategies to predict price that we will learn in the next sessions.
Other forex pairs to trade are the GBP/JPY & the USD/JPY. Let’s look into that now!
USD/JPY.
This is another popular currency pair most traders run for on the market.
The USD dollar/ Yen is the most volatile pair with high market swing movements.
In case you plan to become a day trader, this is for you.
Let’s take a look at swing movements of these pairs using a chart.
From the chart above, price rallied sharply from 14th June 2017 to 11th July 2017. It covered 558.9 pips in just 2 months in just one swing.
Price raise from 108.777 identified by a lower low shadow to 114.366. The difference between the prices is the number of pips covered during this period.
Suppose you took a trade at 108.777 and take profit at 144.366, buying 100,000 units(standard account).
Pip value = [ (0.01×100,000)/114.366] = $8.7. Profit would be = ($8.7×558.9 pips) = $4862.43 on just one trade.
When you See how price moved on the above chart, this would give you enough reasons to stick to this pair. This makes USDJPY one of the best forex pairs to trade.
GBP/JPY.
GBP/JPY behaves almost the same as the USD/JPY. it is also good at making big sharp swing movements in the market. In fact it is also one of the most popular pairs on the market.
Considering our chart above, we see how prices rallied from 17th April to 10th May without pulling back covering 1298.8 pips.
After price has been rejected by the buyers price fell immediately and moved 945.7 pips with out making any stop for the whole months of May and part of June.
On 13th June the buyers took back the market and pushed prices as further as 147.764 covering 913.4 pips. Finally price was pushed back by sellers as low as 141.195 making 848.9pips.
If you are to critically look at the above chart you will realize that each swing covers a full month. This simply means if you predict the right direction as the market, you harvest a huge basket of profits in just a single trade.
Just imagine if you had predicted all the above four swings right; you just retire on the next coming month and have fun on a holiday.
Since we have already learnt how to determine profits using a pip value you can do the maths and see how big your account would grow on just four trades in 4 months.
The other pairs that should not pass your eyes are the NZD/USD and AUD/USD
NZD/USD,AUD/USD – forex pairs to trade
Why you should consider trading the NZD/USD and AUD/USD ?
These pairs are well known to respect support and resistance levels.
They always form double bottom/tops swings around support and resistance levels. Or lower highs moving down or higher lows moving up.
Not only do they respect these levels, but also tend to range around the support and resistance levels. This makes them some of the best forex pairs to trade.
These pairs can help you to know the current volume in the market. therefore it is easy to predict its next move.
While trading these pairs, you can decide to trade when price is ranging between support and resistance. These are price reversals. Or else, you can choose to trade price breakouts on support and resistance level.
Therefore you are already sure of a strategy to trade.
It is also easy to identify the trading setup, entry and exit points.
Let’s take a look at some of these charts.
NZD/USD forex pair vs Support & Resistance Levels
In the above figure, we are looking at a daily chart illustrating how NZD/USD shows respect for support & resistance levels. This happens on all time frames so you can use any of your choice. This makes it one of the best forex pairs to trade.
However the higher time frame is more valid.
The green arrows identify the support levels and the red arrows show the resistance levels.
Since we are still on the introduction part of our sessions, let me first highlight you about the support and resistance levels.
These are areas where prices find difficulty to break through.
A resistance is the level on the market chart above the current market price at which price finds it difficult to rise further. Price is more likely to bounce than break through.
A support is the level on the market chart below the current market price at which price finds it difficult to fall further.
A support is the opposite of a resistance. We shall cover more details when we reach on its topic in the next session.
Back to the above chart, you can now tell how price is rejected as it tries to break through these levels. It either congests or bounces back quickly leaving long pin bars that show price rejections. This can further be illustrated on the next figure below.
Lets take a closer look at AUDUSD,
AUD/USD forex pair vs Support & Resistance Levels
This chart also shows how well AUD/USD respects the levels of support and resistance.
Price formed tops and bottoms as a result of bouncing on these levels. This gives you a clear signals that the trend is about to reverse.
Support and Resistance levels can act as indicators for entry and exit level. Why? because, they directly show the probable reversals of the trend.
At the break of the support level, price is likely to continue for a while. The support will become a future resistance. The resistance becomes the future support.
Other Forex pairs to trade include;
GBP/USD, USD/CAD,USD/CHF, AUD/CAD,CAD/JPY,EUR/JPY, NZD/JPY, EUR/GBP, EUR/NZD,XAU/USD, CHF/JPY, XAG/USD, EUR/AUD, EUR/CAD, EUR/CHF,GBP/CHF, CAD/CHF, AUD/NZD, AUD/CHF, GOLD, SILVER.
As long as your trading strategy performs, all pairs can yield profits if managed properly and traded with discipline.
However it is important to take note of spreads, price volatility and the nature of the pair.
For example,
- Major forex pairs are most preferred compare to other currencies). They are highly liquid and have less or no spread.
- The minors/cross are highly volatile, moderate liquid and some have large spread.
- The exotic pairs have very large spreads and low liquidity.
How long should you hold an Open Position ?
How long you can hold an open position in forex, is a personal thing for all traders. The decision is all yours. You know what your goals are as a trader, the kind of strategy you use to trade. All this starts from what you are? and What you want? If I am to answer,...
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