Which Forex Pairs To Trade?
Author: Richard Meade
Forex pairs are the two currencies involved in currency trading. You exchange or trade one currency say US Dollars for another currency say British Pounds Sterling. The forex pair in this example is USD/ GBP. The question is which are the best forex pairs to trade?
Of course it is possible to trade with any pair of currencies from around the world. In practice, however, it is the currencies of the major economically powerful countries which account for most trades. Note that I say economically powerful and not politically powerful. The Swiss Franc is the currency of a small country, physically and politically but because of the special nature of the Swiss banking system it is very economically powerful and therefore a major player in the financial markets.
Around 90% of all forex trading involves just 6 forex pairs, all involving the US Dollar as the most significant trading currency:
1) US Dollar/ British Pound Sterling USD/ GBP (sometimes known as the Cable Pair)
2) US Dollar/ Euro USD/ EUR
3) US Dollar/ Japanese Yen USD/ JPY
4) US Dollar/ Swiss Franc USD/ CHF
5) US Dollar/ Australian Dollar USD/ AUD
6) US Dollar/ Canadian Dollar USD/ CAD
According to a recent study, the US Dollar is involved in 85% of all trades and the Euro 37%, followed by the Japanese Yen, British Pound Sterling, Swiss Franc, Australian Dollar and Canadian Dollar in order of significance.
When first entering the forex trading market, it is advisable to begin with the USD/ Euro forex pair because there is so much more information concerning these currencies which because they tend to me more stable and more easily manageable result in lower costs.
Some currencies can make difficult forex pairs and should be avoided by the beginner to start with. For example, the Canadian Dollar and the Japanese Yen can be a difficult partner in any forex pair because they are both influenced by fluctuations in the price of oil (Canada is a large oil exporter and Japan a large oil importer).
Of course oil as an example is just one of many influences effecting currency movements and the experienced forex trader will know what to look out for. However, for the beginner my advice would be to trade with the USD/ EUR pair for a while to gain experience and then maybe the USD/ GBP pair as an alternative before moving on to the more volatile forex pairs.
Article Source: http://www.articlesbase.com/currency-trading-articles/which-forex-pairs-to-trade-1027706.html
About the Author
to learn more go now to Richard Mead’s blog http://forexinvestmentmarket.blogspot.com/ where in addition to his regular articles about forex trading he publishes monthly reviews of the latest and best forex trading products on the market. His new eBook Quick And Easy Forex Trading is aimed at understanding the fundamentals of forex trading…it’s on special offer now at http://www.forextradingebook.com/
November 30, -0001
12:00 am #comment-1
Hi Patrick,
I haven’t seen a solution to capturing and recording actual prices for the past X time periods. You can dowload the data from piptrader.com.
A better solution might be to have a programmer crank out an EA for you that would do that for you. (I am surprised that the solution that you are using didn’t think of that as part of their application rather than request you to enter 10 sets of data into a calculator).
I pretty much accomplish the same thing by simply monitoring a couple of moving averages and watching for them to to cross and both maintain a steep angle. This indicates the possible beginning of a reversal.
I would be happy to send you a summary of the moving averages that I use and how I use them. It might be interesting to compare this to the signal that you are getting from your K-F calculator……and it is free.
Paul
November 30, -0001
12:00 am #comment-2
You question is pretty vague. Which currencies. You might be hedged which is good. Which currencies and how many lots and what size. Good luck.
November 30, -0001
12:00 am #comment-3
Yes. If you’re playing option strategies, you should use EURUSD futures options.
November 30, -0001
12:00 am #comment-4
Hi David,
It’s a good question you’re asking. Some forex brokers try to make it out like spots are far superior to futures, but the difference isn’t that big. Other brokers offer both (see some at http://forextradingwinners.com/category/forex-broker-reviews).
Spots are generally cheaper to trade as there is mostly no commission. Spots are not regulated by the FTC either. Spots as you know are settled instantly as opposed to futures. This CAN be cheaper as well.
Spots are more flexible and come in different lot sizes. Futures are often only standard lots of 100,000.
Futures are more transparent and have more info available freely.
November 30, -0001
12:00 am #comment-5
Hi there,
Most of the experts suggest all to trade on popular currency pairs and avoid thin market. This is because of the lack of public participation will cause difficulties in liquidate your positions. It is especially when you are beginners, i would suggest the big five: USD/EUR, USD/JPY, USD/GBD, USD/CHF, and EUR/JPY.
One of the blog you gives all major pair analysis are:
http://forextradingguru.blogspot.com/
http://forexmoneymaker.blog.com/
http://www.finexo.com/marketReview
November 18, 2006
11:24 am #comment-6
Forex pairs?
I hold 3 different foreign currencies in a currency account (initial deposit was in US dollars). Each of the local currencies has gone up in value. The US dollar amount on these has gone down in value. Does this mean i should convert to more of the SAME foreign currencies?
October 13, 2007
3:36 pm #comment-7
How do I set up forex currency pairs to watch in my Yahoo Finance page?
I just started trading Forex pairs and I need to be able to collect price data for the last 10 time periods (hours, days or weeks) so that I can input this information into my trading platform to give me an idea on where the price of the currency pair will move next.
Can anyone tell me how to get this info into my yahoo finance page so that it updates with the movement of the currency pairs?
Any suggestions will be greatly appreciated.
Thanks in advance!!
Patrick
November 2, 2009
8:38 am #comment-8
What pairs are considered the major pairs in the forex market?
I often read statements about the major pairs in the forex market. What pairs are considered the major pairs?
November 3, 2009
1:35 pm #comment-9
Forex Pairs or Individual currency futures what is the benefit of pairs over individual currency?
Hi
I can’t figure this one guys, what is tha benefit of using most forex brokers like FXCM for currency pairs paying a 1-3% spread when I can trade any major individual currency futures for $4.75round trip with a futures broker.
Am I missing a big benefit of trading forex pairs somewhere?
Thanks
December 9, 2009
12:21 pm #comment-10
What is the best way to buy options on EUR/USD or other forex pairs?
I’m currently buying options on the FXE currency fund (I think it’s a Rydex fund). That works, but the spread is pretty high. Is there a better way to buy options on EUR/USD or other forex pairs?