Here we will discuss the best forex pairs to trade. A variety of currency forex pairs are traded in forex market but that does not necessary mean that all forex pairs will do you good depending on the time you choose 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 that is commonly traded by most investors and has a small spread to avoid high transaction costs.
Now that we know how to calculate pip values using lot sizes, we can tell how much we can loose when a trade goes against our direction or how much profit we can harvest after trading. The best forex pairs for you would be that which forms clear and strong trade setups in relation to your strategy.
Some of the best forex pairs commonly traded in the market.
These are some of the most traded forex pairs in the market that can work best for a beginner. The commonly traded pairs in the market are the major currencies followed by the minors. They are known to be less volatile and highly liquid. They are stable and their small movements give you a chance to have clear setups and strategies.
The EUR and the USD dollar are the most traded currencies.
This is due to their high liquidity, less volatile, low spread, stability in the economy. It is easy to find information on the market charts that can be used to identify clear setups to trade. These can help you avoid making mistakes.
EUR/USD has a low bid and ask spreads and always available even for large traders. In addition to its stability it has good swing movements therefore a bit easy to predict and trade.
The fact that it is a less volatile currency pair, 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
The chart below illustrates price movement of a EUR/USD on an H4 chart time frame. You can easily notice how price makes easy formations and good swing movements. Figures 1 to 8 show different formations that can be used to enter and exit trades and 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 and you are able to 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 and learn how to use them. For now we are just taking you through the introduction of how some currency pairs behave on the charts and which ones you should consider trading first.
In this situation if I were to trade this pair, I would have a buy at formation 1, exit at 2 or sell at 2 then exit at 3 or enter a buy again at 3 exit at 4,there is a sell too at 4 exiting at 5. From 5 to 7 we 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 us a strong signal to buy. At formation 7 we exit trade.
If you were observing the chart very well you will realize that our identified formations circled in black have a 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.
Another forex pair you should consider trading first is the GBP/JPY or the USD/JPY. Let’s look into that now!
Lets start with the USDJPY
The USD dollar/ Yen is the most volatile pair with high market swing movements. It is commonly traded by day traders due to its sharp swing movements
Let’s take a look at swing movements of these pairs using a chart.
From the chart above, price rallied sharply from 14thjune 2017 to 11th july 2017 covering 558.9pips in just two 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 had entered a trade at 108.777 and take profit at 144.366, buying 100,000 units(standard account). Your pip value would be[ (0.01×100,000)/114.366] = $8.7. Profit would be = ($8.7×558.9 pips) = $4862.43 on just one trade. Seeing how price moved on the above chart would give you enough reasons to stick to this pair.
Let’s now consider another example on the GBP/JPY.
This pair is well known for its sharp swing movements in the market and can yield you high profits when traded well. In fact it is one of the most traded pairs in the market by most traders.
Considering our chart above, we see how prices rallied from 17th April to 10th May giving a very sharp movement covering 1298.8 pips without making any kind of retracement. After price has been rejected by the buyers price started falling 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 and finally price was driven 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 math and see how big your account would be on just four trades in 4 months.
The other pairs that should not pass your eyes are the NZD/USD and AUD/USD
Why you should consider trading the NZD/USD and AUD/USD ? These pairs are well known to be having much respect for support and resistance levels. They always form double bottom/tops swings around support and resistance levels forming lower highs moving down or higher lows moving up.
To me i would say one should choose a pair considering its volume, range movements and its predictability. The one that shows all the required elements is the best pair to trade.These pairs have all that and that’s why I am recommending it as a good choice for the beginners. Let’s take a look at some of these charts.
In the a above figure, we are looking at a daily chart illustrating how NZD/USD shows respect for support and resistance levels. This happens on all time frames so you can use any of your choice 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 in our 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.
Comparing the small explaination we have raised with the a bove chart, you can now tell how price is rejected as it tries to break through these levels by forming a congestion or bouncing 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,
This chart also shows how well AUD/USD respects the levels of support and resistance on any kind of time frame. It forms tops and bottoms as a result of bounces on these levels and these give clear signals for trend reversals. When used well support and resistance levels can act as indicators for entry and exit level since they directly show the probable reversals of the trend.
At the break of the support level price is likely to continue for a while and the the support will become a future resistance. The same happens to the resistance.
Other pairs that can be traded 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 attached to different pairs, price volatility and the nature of the pair(for example the major currencies are most preferred compare to other currencies).
How long you should hold an open position, 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, this...
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