Which currency pair is better to trade?
There is no unequivocal advice as to which currency pair is better for this or that trader. There is no division of currency pairs into categories for beginners and professionals. However, there are a few things to consider when choosing a currency pair.
Choose the economy you know the best, like Japanese, Canadian or Swiss, and so on. From this, make a start in choosing a currency pair. It is best to choose the opposing side for the pair. If, for example, you have chosen Japan, then it will be best opposed to the United States, that is, the dollar (USD / JPY).
Collect data sources – important publication dates in the economic calendar concerning Japan and the USA, sources with economic news from both countries. Track the dynamics of change based on past publications and news. Identify the strongest impulses and important events to watch out. Bookmark important sources and browse them constantly.
There is an opinion that it is better to choose the most liquid and popular assets, but I do not think this is the correct decision. The point is that it is much easier to analyze a small economy. For example, the NZD (New Zealand) does not have as many main factors of influence on the economy as the US or the EUR. The same goes for such currencies as AUD, ZAR, SGD, and CAD.
If your deposit is less, then look at the charts of such currencies, and you will see longer and quieter trends, which indicates easier forecasting.
Features of popular currency pairs
EUR / USD is one of the most popular currency pairs among traders and one of the most traded. The volatility of the pair is quite high. However, predicting the dynamics of this pair may be too difficult for a beginner because of the high randomness of quotes due to a large number of players and periodic changes in directions caused by the actions of many professional traders from around the world.
USD / JPY is one of the most unpredictable currency pairs. It often shows quite sharp jumps and spikes on the chart. Forecasting this pair is extremely difficult. Quotes are strongly influenced by political news.
AUD / USD is a fairly calm pair with moderate volatility. It lends itself quite well to technical analysis and has a pronounced guide – the quotation of metals. Correlation with metal prices is straightforward. Due to its fairly accurate forecasting ability fits the definition of a “currency pair for beginners”. However, when trading, you need to pay attention to the technical analysis of metal price charts.
GBP / USD is a currency pair that reacts quite strongly to UK news. The pair is quite volatile; breakdowns of support and resistance levels, and false breakouts are frequent on the chart. The chart often follows the analogy with the EUR / USD pair. However, it would be a mistake to assert their similar movement and be guided by the Euro chart when trading the Pound.
USD / CAD is a pair with moderate volatility and tight correlations. The Canadian Dollar exchange rate is closely related to oil prices. Therefore, when analyzing quotes and forecasting, it is necessary to consider the dynamics of oil prices. It is a profitable currency pair for oil traders, as its volatility sharply rises when news releases on oil.
« What is carry trade in Forex? What is quantitative easing? »
