Every currency pair available to Forex traders has a personality. Different pairs have different spreads, different support and resistance levels, different reactions to news and different levels of volatility. The best currency pair for you to trade depends on your personality, your tolerance for risk and the type of trading you want to do. Since no currency pairs are the same, finding the best match between a trader and a currency pair sets the trader up for success.
The three most popular currency pairs are the USD/EUR, the GBP/USD and the USD/JPY. Their volatility, trading volume and low spreads make them the ideal pairs for beginners. Let’s take a look at some of their traits.
The USD/EUR has several advantages for new traders. Firstly, it has a small spread. The spread is the broker’s commission on a trade, so the lower the spread, the less each trade costs you. EUR/USD isn’t too volatile, but during the New York market hours the trading volume is high enough that your trade will go through quickly.
There is more information available about the USD/EUR than there is about any other currency pair. All the analysis helps you learn the currency pair quickly and gives you a lot of ideas for good trades.
The USD/JPY also has a low spread, making it cheap to trade. The JPY is one of the less volatile currencies, which makes it a little easier for new traders to spot trends and make decisions. Since JPY pairs don’t jump around too much, beginners have a little extra time to act and the pair is a little less stressful to trade than many others.
As with the EUR/USD, there is plenty of analysis of the USD/JPY. A strong correlation between JPY pairs helps beginners confirm trends by looking at the other JPY crosses, like the EUR/JPY, CAD/JPY or GBP/JPY.
The GBP/USD is a significantly more volatile pair than the USD/EUR or the USD/JPY, so the price swings are fast and they move further than those of either pair. However, the spreads are wider and the strong swings mean trades are riskier and more expensive than trades on the other pairs. Trading GBP requires more margin and wider stops, but it’s a great place to ride the trend into big profits. Commentators around the world analyze GBP/USD, so it’s very popular among all traders, not just beginners.
For US-based investors, picking a pair with the USD as the base or the quote currency means you’ll see a greater volume of trading while the US markets are open. The higher the trading volume, the faster your trades will be processed and the better the price you’ll get.
Beginners should stick with the widely traded major currencies; the Euro, the US Dollar, the British Pound, the Japanese Yen, the Swiss Franc, the Canadian Dollar and the Australian Dollar. These currencies have the greatest volatility, the lowest spreads and give new traders the best opportunity to make money.
For more information about the different currencies and quality investments be sure to visit the professionals of LucrorFX today.