What is the best Forex pair to trade? This is a question we are very often asked and the answer is enclosed in this article and it may surprise many traders especially beginners so lets look in more detail at the best currency pairs to trade for profit.
There are a huge amount of currency pairs to choose from when trading currencies and most traders will trade the following, due to their huge volume and low transaction costs.
Most Popular Currency Pairs to Trade
Here are the most popular currency pairs to trade with the Euro V US Dollar (USD) being the most popular pair followed by the Japanese Yen. These two do the most volume of all against the USD but the other pairs listed also offer good volume
Euro ( EUR) Japanese Yen ( JPY) British Pound ( GBP) Australian Dollar ( AUD) Canadian Dollar (CAD) and New Zealand Dollar (NZD)
All these pairs offer good volatility, high liquidity and competitive spreads - so which is the best pair of all to trade?
The answer is the best pair to trade changes all the time. In terms of Forex trading education, the best advice I can give is there is no best pair to trade and if you think there is – you will not maximize your Forex trading profits and also increase your risk.
This is because, currency markets trend then consolidate at different times. The best currency pair to trade therefore depends on the type of trading strategy you use and the behaviour of the pair, in a certain time frame. For example if the EUR USD is not trending and you use a trend following strategy, then its not the best to trade if the USD JYP is trending strongly up or down.
Many people say that one pair is better but it's not at all. If you are using a chart based trading system based on technical analysis and its
Many Forex beginners simply look at the EUR/USD and fail to look at the other pairs but this is a huge mistake – you should trade the pair which is moving the best in terms of the system you are using. The currency pair doesn't matter the price patterns do, in relation to your style of trading.
Don't Worry About a Pip or 2 on the Spread!
Many traders for example focus on the EUR/USD and trade it because it will normally have the best pip spreads but the difference of a couple of pips on the spread is NOT important – why? Many traders think, that day trading or scalping are the way to make money trading Forex and its more popular than any other strategy but the reality is - this a dumb way of trading and causes losses.
It's one of the biggest myths of Forex trading that day trading is the best strategy to make money but the reality is it's the worst with low odds of success with your trading signals. You cannot get market timing which will make you long term profits when your trading in the random noise of the market and we have covered why, in other areas of the site.
You should be trading for hundreds or thousands of pips by using a swing trading or long term trend following strategy and a couple of pips more on the spread will be offset by trading the best pair in relation to your trading strategy.
Advantages of Cross Rate Trading
You do not have to trade a currency just against the US Dollar, you can trade crossed such as EUR/GBP or JPY/CAD, to name just two. These crosses very often offer great trends and they also offer trends which are less spiky and smoother than trading a major against the USD – Why?
The reason is there are less speculators and big funds trading these currency pairs and this means they have less price spikes and lower volatility around key chart turning points. This means traders can very often trade them with tighter stops and also have less chance, of being taken out by a volatile short term price spike against them. You get some fantastic opportunities in my view trading these crosses so make sure you keep monitor them for opportunities.
Minor Currencies and Exotics
There are a huge number of other minor or exotic currencies such as the Brazilian Real or South African Rand and they also offer good opportunities at times but due to their lower liquidity many, will have far wider spreads and really these are for more experienced traders. For beginners, stick with the major pairs and the crosses between them and you will have a good spread of pairs to look at and trade. Don't fall in love with one pair! Always view the pair in relation to your trading strategy and choose the best pair in relation to this criteria.
Technical analysis and trading charts is all about the best high odds set ups not the name of the currency pair on the chart. The best Forex trading pair to trade varies all the time and is a reflection of the chart related to your trading system. If you keep this in mind, you will not restrict your trading techniques to just one pair and end up trading low odds opportunities. You will simply seek the best opportunities for profit, where ever you see them and enjoy bigger Forex trading profits.