Which Currency Pair(s) Should I Choose To Trade?

Which Currency Pair(s) Should I Choose To Trade?

There are many currency pairs to choose from but which pairs should you trade? In my opinion, the currency pair(s) you choose to trade should be based on your trading style and trading experience. 

Three main types of currency pairs are: 

•   The Majors Pairs: (mostly traded) EUR/USD, USD/JPY, USD/CHF and GBP/USD. 

•   The Commodity Pairs: (associate with gold and oil) USD/CAD, AUD/USD and NZD/USD. 

•   The Currency Crosses: (non-USD pairs) most popular are EUR/GBP, EUR/JPY and EUR/CHF.

Here is the list of major currencies beginner traders should focus on:

Euro (EUR)

US Dollar (USD)

British Pound (GBP)

Swiss Franc (CHF)

Japanese Yen (JPY)

Australian Dollar (AUD)

Canadian Dollar (CAD)

Here are some tips on why you should choose certain pairs: 

•   Are you US dollar bullish or bearish? Choose a major currency pair to trade against the dollar. 

•   Trade a commodity pair if you like to focus on Gold or Oil prices. 

•   Are you new to Forex? Start trading a less volatile pair such as the EUR/USD or EUR/GBP. 

•   Focus on one currency pair only and try to learn everything about it. Become an expert! 

•   Avoid the GBP/USD and GBP/JPY when you are afraid to lose 100 pips in 15 min, learn how to trade them first.

What are the Best Currency Pairs to Trade?

If you're new to Forex trading, you'll know that there is a lot to learn, and one of the decisions you are faced with is knowing which currency pairs to trade. Should you concentrate on one or two or should you be prepared to trade any number of different currencies? Well, different traders will have different opinions on this and the truth is that there is no right or wrong answer. Every trader is different and will have their own style of trading, and this may incorporate focusing just on one currency, such as the EUR/USD for example, or may involve watching a number of pairs and waiting for a good set-up to occur on any one of them. 

An alternative approach, and one favored by myself, is to only concentrate on one of the major currency pairs. This is because they are the most widely traded, which means that with so many traders and financial institutions watching and trading them, they conform even better to technical analysis, which after all is effectively a means of displaying human behavior. Another reason I favour only trading one of the major currencies is because they generally have the tightest spreads which is important because over time, these higher spreads can really make a dent in your profits, and if you're a short term trader or scalper, they can make trading extremely difficult. 

For example if you trade the EUR/USD you will generally be looking at a 2 or 3 point spread whereas if you trade one of the minor pairs such as the EUR/CAD for instance, you could be looking at a 8 or 10 point spread. 

You can be successful trading Just One Pair

Many Traders are successful trading just one pair. The advantages of trading one pair include getting to know how one currency pair moves better, less to concentrate on when trading, which in turn leads to less distraction. One great example of a trader who is successful trading only the GBP/JPY is NickB at the Forex 4 Noobs website. By only trading the GBP/JPY using his scalping strategy, he has averaged over 100 pips profit every week for a year. I really like his site and love to use his trading for newbies as a simplistic approach to becoming successful.

Many traders do not like to trade one pair because their trading style doesn’t get them into trades as frequently enough as they would like and they feel like they are missing out on the action. I call these people over traders and most of them will not be successful at all in the long run. I personally like to only trade one pair when I am trading with my system.

Also, a common mistake done by many beginner traders is that they try to monitor too many currency pairs at once. Not only it makes trading hectic and more difficult to manage, it also prevents deeper analysis of the currency pairs and actually learning their “behaviour” over the time. Currency pairs do have their unique ways to move, react to economical events or news, form trends etc. By studying one currency pair at the time, Forex traders have the ability to observe its behavior and learn the ways to trade the pair even more effectively. 

As a method therefore, I will suggest you should be trading:

USDCAD if you live in Canada.

AUDUSD if you live in Australia

USDJPY if you live in East Asia

GBPUSD if you live in UK

EURUSD if you live in European Union

And then trade any of the USD pairs if you live in USA. (etc) 

If you live in Nigeria, you should be trading the EURUSD pair

The reason why I’ve suggested the above is that trading the currency that you are familiar with has lots of advantages vs. trading currencies that you’ve never used. For instance, a person that lives in Canada remembers approximate range of CAD vs. USD during the past ten years or more and has much better understand of those currencies than average person from Japan.