Best Forex Pairs To Trade

Choosing the best forex pairs to trade is very important for successful trading. Every currency pair has its characteristics based on various parameters. These parameters must be studied and understood in every possible manner. Currency pairs can be widely classified as major currencies, minor currencies, cross-currency, and exotic currencies.

The main currency pairs are based on major economies like the United States, Europe, Great Britain, Japan, and Switzerland. The minor currencies are based on the economies of Australia, New Zealand, and Canada. The exotics include a wide variety of countries, including South African, Turkey, and Hong Kong, to name a few.

Major pairs

GBPUSD , EURUSD , USDJPY , USDCHF

Minor Pairs

AUDUSD, NZDUSD, USDCAD.

Cross-currency pairs.

GBPJPY , EURJPY , CHFJPY , AUDJPY , NZDJPY , CADJPY , GBPAUD , EURAUD , GBPNZD , EURNZD , GBPCAD, EURCAD , GBPCHF , EURCHF , AUDCHF , NZDCHF CADCHF , AUDNZD , AUDCAD , NZDCAD.

Exotic currency pairs.

USDTRY , USDNOK , USDHKD , USDSGD , USDMXN , USDTHB, USDZAR, USDDKK, USDRUB, EURTRY , GBPZAR , EURZAR , EURMXN , GBPTRY , GBPDKK , GBPNOK , GBPSGD , GBPSEK , EURTRY, EURHKD, EURSGD, EURRUB.

Currencies are always traded in pairs, as it includes simultaneous buying and selling of currencies. Currency pairs are considered as a single unit in terms of pricing. The first currency in the currency pair is called the base currency, and the second one is called the quote currency. Together the base currency and the quote currency form a single unit and the price is quoted for the same.

For example, in the EURUSD = 1.2100, Euro is the base currency, and USD is the quote currency. The price is quoted as 1.2100 for this pair which means one Euro is equal to 1.2100 US Dollars. Which means selling 1 Euro would fetch 1.2100 US dollar. Conversely, 1.2100 US dollars would buy one Euro.

Contents

1. Forex pairs and volatility
2. Best Forex Pairs To Trade For Beginners
3. Best Forex Pairs To Trade 2021
4. Best Forex Pairs To Trade Reddit
5. Cheapest Forex Pairs To Trade
6. Best Exotic Forex Pairs To Trade
7. Which Currency Pair Is Most Profitable In Forex
8. Conclusion

Forex pairs and volatility

The volatility of a Forex pair is measured as to how far the currency pair prices deviate from their average prices. Volatility is vital for successful trading. The more the currencies are volatile, the more opportunities they offer to trade them. Increased trading opportunities increases the possibility of making profits. Volatility can be measured using various methods. There are multiple indicators and tools used to identify and measure volatility. However, ATR and Standard Deviations are used to calculate volatility by most traders. (Further read: ATR Indicator)

It is evident that volatility offers multiple opportunities to trade. However, a currency that is too volatile is often difficult to trade. As the volatility increases price fluctuations, they may result in confusing and conflicting information regarding the direction of the trend. A highly volatile market may not be suitable for new traders, but on the other hand, it may provide reasonable returns and excellent results for experienced forex traders. In summary, though volatility is important and necessary for trading, too much volatility could be detrimental for trading.

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Best Forex Pairs To Trade For Beginners

As a beginner starting to enter this exciting Forex trading world, it is essential to choose a stable currency with necessary volatility and price fluctuations to trade profitably.

The following are the best currency pairs to trade for beginners.

EURUSD                    

EURUSD is the preferred currency for beginners. The EURUSD pair is combined by the two best economies in the world, the United States and Europe. The prices are usually stable, so beginners who have difficulty understanding currency trends, volatility, and price fluctuations find it easy and simple to understand. Moreover, this currency pair normally has a very stable trend with rare, unusual fluctuations.

Many traders who start their forex trading career and are starting to explore technical indicators and formulas will find it easy and accommodative while using those indicators. The EURUSD pair also has a very low spread compared to other currencies spread is a cost of trading. Liquidity is a vital factor to trade any currency successfully. EURUSD is the most liquid currency pair in the world and makes it one best currency pairs to trade for beginners

USDJPY

The next best forex pairs to trade for beginners are the USDJPY which combines the world’s best economies, the United States and Japan. The USDJPY pair tends to be very stable and typically displays trends and chart patterns very clearly in the charts. Most technical indicators fairly respond to this currency pair and provide the beginners with easy technical analysis based on the charts.

Japanese yen is generally used across Asia and therefore provides a stable and predictable price level. The spread is very low, and the currency pair is highly liquid.

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Best Forex Pairs To Trade 2021

EURUSD , GPBUSD , USDJPY , USDCAD , GBPJPY , EURJPY

EURUSD

The first choice is EURUSD which is the most liquid and stable currency in the world. Based on its performance in the previous years, we expect it to continue to perform at its best in the coming year. The EURO represents the Euro zone, and the European Central Bank has repeatedly announced its commitment to provide ample liquidity to the market due to the corona virus pandemic. The monetary policy of the European Union is aligned to provide necessary stimulus whenever necessary. On the other hand, the United States is also expected to roll out further monetary policies throughout the year.

GBPUSD

GBPUSD pair fluctuates frequently. The volatility in this currency attracts quite a number of traders. Because of the increased volatility, this pair provides considerable profits for traders. The economy of Britain currently depends on Brexit and the corona virus pandemic. Prices of this GBPUSD pair will be dictated by how Great Britain fares after the Brexit. Now, we are in the initial stages of Brexit. It may take a while before companies get accustomed to the implications of Brexit and what policy changes are initiated by the government. We will also have to see how trade relations with Europe are going to develop. The corona virus pandemic is quite severe in the UK and will show its implications on the forthcoming quarters’ real economy. On the whole, it will be an exciting pair to trade in 2021.

 USDJPY

USDJPY is the most favorite currency of forex traders when it comes to carry trades. Japanese yen is considered an essential tool for hedging by financial institutions and Corporates. The course of movement of this currency pair will be mostly dictated by Japan and the United States’ interest rate policies. It is also essential to watch out for the frequent interventions of the Central Bank of Japan. Central bankers will mostly dictate the overall trend and direction of this currency this year.

 USDCAD

Forex traders closely monitor USD CAD because it correlates with the Oil prices. Canada is also one of the important trade partners of the United States, given the United States’ proximity. Oil prices and energy markets, on the whole, are currently experiencing supply chain disruptions, and these disruptions are effectively reflecting on the prices of USDCAD. It will be exciting to trade USDCAD this year and observe how oil prices will reflect USDCAD prices. The current vaccination program of corona virus may increase industrial productivity and industrial activity and increase the oil demand. 

 GBPJPY

GBPJPY is yet another exciting pair to trade in 2021. It offers multiple opportunities to forex traders as the pair combines the volatility of the British Pound and the Japanese yen’s stability. This combination generates long periods of trends, which translates to significant profits as the trends last for extended periods compared to similar currency pairs. As a result, most traders prefer GBPJPY.

 EURJPY

A stable political system backs both Euro Zone and Japan. EURJPY is a stable currency to trade and has relatively low volatility when compared to GBPJPY. Both Euro zone and Japan have approached and accommodated monetary policies very effectively during the last year. The upcoming year 2021 will also provide similar stable trading opportunities for forex traders to trade in.

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Best Forex Pairs To Trade Reddit

Recently, Reddit has become an essential source of information for new Forex traders. Most traders find it difficult to understand and apply technical analysis, so new traders visit Reddit to copy and follow other traders’ technical analyses. A different set of traders use Reddit to confirm their stand on technical analysis with other traders. The social trading phenomenon is not new and has been available to Forex traders through many global forums. But Reddit has become sensational after the GameStop Saga. However, it is always recommended to know other people’s opinions while trading volatile currency pairs and Exotics. The purpose should be into exploring other’s views and opinions and address them accordingly.

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Cheapest Forex Pairs To Trade

Every business comes with a cost, and so does Forex. In Forex the cost of trading is the spread. The spread is the difference between the bid and ask of a currency pair, and there are two different types fixed spreads and variable spreads. The size of the spread depends on the broker, the volatility of the currency pair and the type of your forex account, and the trading volume. 

The following currency pairs normally have the lowest spreads EURUSD, USDJPY, EURJPY, GBPUSD, USDCHF. In general, USD pairs have the lowest spreads as they have the highest liquidity.

Further read: What does spread mean in Forex?

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Best Exotic Forex Pairs To Trade

Exotic currency pairs are formed by combining a major currency against an emerging currency. For example, the currency of a major economy like the US dollar can be paired with an emerging economy like the Turkish Lira to form USDTRY a tradable instrument in Forex.

Exotic currencies lack liquidity like the major currency pairs, the reduced liquidity increases the cost of business, the spread. Most exotic currency pairs have higher spreads, so forex traders should calculate in advance and incorporate this cost within their trading strategy.

However, exotic currency pairs are very volatile because of the lack of liquidity. The thin liquidity moves the market into extremely volatile conditions. So forex traders should be cautious while trading exotic currencies. Due to low liquidity, these currency pairs tend to have a higher slippage during order execution. Also, there is a risk of a price gap during the weekends. Forex traders should consider holding positions through weekends as the market gap may result in a stop loss at a worse than expected price.

Some of the best Exotic currencies to trade are GBPZAR, EURTRY, USDMXN, USDZAR, USDHKD, JPYNOK.

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Which Currency Pair Is Most Profitable In Forex

To trade a currency pair profitably, it needs to have volatility daily. Most significant pairs are volatile and have ample liquidity with a healthy average movement of price. GBP pairs also provide an average moment of 100 pips per day. These price fluctuations provide the necessary enthusiasm and profit opportunity for traders. However, forex traders should approach these currencies with caution as trading against the trend of these currencies may be detrimental. So careful study and thorough analysis of these currencies in terms of technical and fundamental analysis are warranted.

The following currency pairs provide multiple opportunities daily for Forex traders and are considered more profitable in Forex.

EURUSD , GBPUSD , AUDUSD , USDJPY, USDCAD , GBPAUD , GBPCAD , GBPJPY

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Conclusion

The essential characteristics of trade currency pair depend upon volatility, average trading range per day, the currency pair’s ability to trend, and lower trading cost – spread. Traders tend to trade major currency pairs or cross currencies, but it all depends on the trader’s ability to analyze them and act upon that analysis at the end of the day. However, the best forex pairs to trade depend upon every trader’s risk appetite and trading knowledge. Every individual has to evaluate their purpose for forex trading and create strategies accordingly.

Though forex trading brings in plenty of opportunities in all types of currency pairs, with more currency pairs added to the tradeable list of currencies, with an open market 24 X 7, it brings in equal risk and reward. So, forex traders must use sound money management practices, account management strategies, and fundamental and technical analysis to be successful and for a rewarding forex trading.

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