Question
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How to choose the forex pairs to trade?
9 Answers
<p>The largest major pair—in fact, the single most liquid financial instrument in the world—is the EUR/USD. This pair trades almost $1 trillion per day of notional value, from Tokyo to London and New York, 24 hours a day, five days a week.? The two currencies represent the two largest economic entities in the world: the U.S. with an annual GDP of $21.43 trillion and the Eurozone with a GDP of about $13,335.84 billion.</p>
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<p>The three most liquid commodity currencies in forex markets are USD/CAD, AUD/USD, and NZD/USD. The Canadian dollar is affectionately known as the "loonie", the Australian dollar as the "Aussie," and the New Zealand Dollar as the "kiwi".? These three nations are tremendous exporters of commodities and often trend very strongly in concert with the demand for each of their primary export commodity.</p>
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<p><br>Choosing a currency pair for trading requires an individual approach, which depends on one’s personal preferences. I advise beginners to start with major pairs. Depending on your trading style, focus on one pair, or trade several. Three important criteria – volatility, cost per trade, and activity time – will help you with your choice.</p>
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<p>It is purely up to a trader's trading strategy and preferences to decide what currency pair to use. Risk-lovers should opt for minor or exotic pairs since they have less liquidity and high spreads, but the greater the risk, the greater the return. The best choice would be to trade major currency pairs if you want to be on the safe side because they have higher liquidity and leverage.</p>
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<p id="isPasted">Choosing a currency pair depends on your understanding of the currencies and the countries they belong to. There are a few basic parameters that one can consider while choosing a currency pair:</p><ol style="list-style-type: decimal;margin-left:50px;"><li><strong>Volatility:</strong> the currency pair should provide sufficient volatility to have good potential trading opportunities.</li><li><strong>Liquidity:</strong> There should be enough buyers and sellers of the currency pairs.</li><li><strong>Easily predictable: </strong>The currency pair should be predictable and easy to trade.</li><li><strong>Spreads:</strong> they should offer tight spreads so as to reduce trading costs.</li></ol>
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