How To Choose The Best Forex Currency Pairs To Trade

How To Choose The Best Forex Currency Pairs To Trade

With a more integrated market atmosphere, Forex instruments become more diversified day by day. Many traders try to find the best Forex currency pairs to trade for themselves, but sometimes, they cannot achieve it. When it comes to making the decision, two ideas are shaping the debate. 

One of them focuses on the consistency of the Forex currency pairs and claims that traders should trade only currency pairs that follow the same path and shows certain behaviors. According to this argument, you can be a successful trader if you get specialized in a few currency pairs and their reaction to the market changes.

The other school of thought says that price charts and action give us everything we need regardless of the Forex currency pair. You have to look for every pair and trade if you see any opportunity in the market. While the first one is more suitable for fundamental traders, this method is more useful for traders applying technical analysis.

While choosing the best Forex currency pairs to trade, you should be aware of different types of currency pairs and their features. 

Mainly the currency pairs are divided into two: major currency pairs and exotic currency pairs. The former one represents the most famous and important currencies due to their high trading volume. The EUR/USD, GBP/USD, and USD/CAD pairs are some of them. On the other hand, exotic currency pairs are the other pairs with very little trading volume and a low level of liquidity. The EUR/TRY and GBP/ZAR pairs can be given as examples for this category. 

Remember that the driving force of the Forex market is volatility and high liquidity. You can only make profits if there are jumps and dips at the prices and you can find a counter-party in the market. In these terms, exotic currency pairs do not offer more than major currency pairs since their low liquidity slows the traders down and sometimes they cannot execute their orders at the desired price in a ranging market.

SEE ALSO: HOW TO AVOID LOSS IN FOREX TRADING ≫≫

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