Choosing The Best Currency Pairs To Trade

So, you’ve set up your trading account.

You’re raring to go.

But which currencies should you trade?

This depends on you and what you’re comfortable with.

It also depends on your schedule and how much or how little time you want to spend trading.

I like trading for only minutes each day so I can get on with lots of other interests.

My motto is: there’s a whole world out there and life is too short to spend it in front of a computer screen.

That’s just me though.

Some people enjoy pouring over hours of analysis of the market, so good luck to them.

Finding the way to trade that suits you is most important.

The right currency market to trade for you is a big part of this…

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Find the market to trade that suits you

I trade the six major currency pairs.

These are the AUD/USD, EUR/USD, GBP/USD, USD/JPY, USD/CHF and USD/CAD.

The currencies are all against the US Dollar. I’m sure you will recognise the abbreviations… Australian Dollar, Euro, Pound, Japanese Yen and CHF is the Swiss Franc.

The majors are good because they are the most accessible to trade.

They have the biggest daily turnover, which means they are highly liquid.

The dealing costs are low and they can be more predictable.

This is because liquidity affects how prices move, and highly liquid markets tend to be less erratic.

This where we want to be.

I used to trade cross rates such as IDR/MYR (Indonesian Rupiah against Malaysian Ringgit) and HKD/JPY (Hong Kong Dollar against Japanese Yen) in my investment bank days.

These are definitely not for the faint hearted!

When starting out, you should start trading currencies that you are comfortable with…

Currencies that you know are a good starting point. It’s also best to keep things simple.

Below is the daily candlestick chart of the EUR/USD pair.

You can see there is fantastic movement in this currency.

This is what we want as it gives us the biggest opportunity to profit.

The currency has moved from a low at the bottom left hand corner of the chart of 1.2866 on 22nd April 2009, to the high at the cutting edge now of 1.5049.

It’s a rise of over 17%.

It has risen by 2,183 pips (0.2183) in only 6 months!

You would not expect to catch the whole move. Hindsight is a great thing!

But, can you see the clear uptrend pattern on the chart?

Those who knew how to spot this brewing have had an amazing ride.

I hope you see how it is possible to capture big profits from trends like these.

The EUR/USD is definitely a hot market.

But as with most opportunities, timing is everything.

To make profit you have to buy at the right time. You also have to know how to manage your risk.

We’ll be looking at timing next time, so watch your inbox.