A country’s position can be affected by a variety of factors such as political stability, monetary policies, GDP, interest rates, and more. Traders who strategize their trades based on fundamental analysis constantly monitor these factors. Meanwhile, technical analysis focuses primarily on indicators, price action, and/or financial instruments of the country. The setup of currency pairs is always determined by an international code. For instance, a quote of EUR/USD 1.30 refers to the exchange rate for one Euro worth $1.30 .

Meet other traders, research online and travel to understand the world. Don’t be afraid to invest in a currency in use halfway across the world, diversify your investments and become a more worldly person in the process. The 2nd major influence on the price of GBP was Brexit, the name given to the 2016 vote that would separate Britain from the European Union. In particular, the price of oil has a large amount of influence over the value of the Canadian dollar because Canada’s economy relies heavily on oil exportation.

Our top three are closed by an asset, which many traders have nicknamed Gopher, for its constancy and long-term stable trends. The second most popular Major, which is the easiest Forex pair to trade. Keep up to date with our news and analysis section of the website, which can provide insight and predictions into future movements in the forex market. Although you are trading on lower timeframes, such as the five-minute chart, it pays to check the daily chart to assess the overall trend. It is easier to read these five Forex currencies because they’re either ranging or trending. When a trend begins, the price action tends to move for a significant period.

Despite the complicated economic situation in some European countries, the value of this currency still remains quite high and stable. The world’s second reserve currency is also considered to be one of the safest investment decisions. Olga Protska Senior Content Writer & 2D Artist Is it worth investing in currencies? However, as with any investment, there’s always a certain level of risk. The value and stability of any currency depend on a number of factors and the situation can change rapidly. Read the news, check current events and consider how these events impact governments around the world, investor sentiment and currency prices.

Important factors to consider when selecting currency pairs

As the value of the CHF strengthens against the USD due to increasing investment, the price of this currency pair starts to drop. Although it is one of the most stable currency pairs to trade and therefore https://day-trading.info/ offers many benefits. However, when the markets are in a more stable position, the USD/CHF may be of less interest to traders who opt for other major currency pairs that are featured on this list.

This is another important aspect of choosing currency pairs. As such, when trading forex, normal expenses are the spread – the difference between the rates of a buy and sale. This is due to the strong positive correlation between the Swiss franc, the British pound, and the euro. The franc has long been thought of as a safe haven for forex traders in times of political unrest. You will see one or two currencies in almost every famous currency pair from this list.

What Makes a Good Currency Pair?

Below are some important things to consider when choosing the best currency pairs to trade. The NZD/USD pair is best suited for forex swing trading strategies due to its back-and-forth price movements. Along with the Australian Dollar and the Canadian Dollar, octafx review the NZD is a commodity currency, meaning that its exports mainly include raw materials (precious metals, oil, agriculture, etc.). Since the NZD has also been a traditional vehicle for forex traders, it is very sensitive to changes in interest rates.

How Does Currency Trading Work?

Other factors like interest rates, new economic data from the largest countries, and geopolitical tensions are just a few of the events that may affect currency prices. Currency trading is a 24-hour market that is only closed from Friday evening to Sunday evening, but the 24-hour trading sessions are misleading. There are three sessions that include the European, Asian, and United States trading sessions. Nowadays, all transactions take place virtually; as a result, you need a reliable and trustworthy trading platform.

Forex Risk Disclaimer

For new traders who are going to trade in the Tokyo session, it’s important to know key factors related to this session. Typically, the Tokyo session can be defined as a trading platform where traders bond to assist because of the low level of volatility and liquidity. Remember that AUD/JPY mostly faces low liquidity because of it you can’t buy or sell currencies when you want. To avoid this situation, always trade this currency pair when markets are at top hours like between midnight to 6 am GMT.

From a trader’s perspective, liquidity refers to how easy it is to enter or exit a trade. During periods of high liquidity, the best currency pairs to trade are the ones with lower spreads. To be successful in the Forex market, you need to understand the different currency pairs you trade with. You can simplify your trading process by selecting the major currency pairs since you will be able to access plenty of expert analytical advice and data. When you are just starting out in the Forex market, it is best to stick with trading the major currency pairs.

You might add trendlines and support and resistance lines to your charts. Australia has a strong trading relationship with China, which helps to boost the AUD. Whatever is happening between the two countries affects the price of AUD/USD.

The foreign exchange, or Forex, is a decentralized marketplace for the trading of the world’s currencies. Electronic currency trading is a method of trading currencies through an online brokerage account. Currency prices fluctuate based on the economic situation of the countries involved, geopolitical risk and instability, and trade & financial flows, among other factors. This is how you become a resilient trader that will not only survive the market but use it to gain profits in the long term. And there is no better time to trade Forex than when you have all the pieces in place. It is best to avoid trading currencies, equities or anything if you do not have the right mindset.

Your risk appetite

EUR/USD is such a popular currency pair that it has very low bid/ask spreads and there are always available units for even very large trades. Understanding the differing characteristic and certain criteria of currency pairs will aid you in selecting those best suited to your trading strategy. The USD is supported by its status as the reserve currency of choice for central banks around the world and many key commodities (e.g. oil) are priced in US dollars. All currency pairs are categorized according to the volume that is traded on a daily basis for a pair. Just like one shoe doesn’t fit all, there is no particular currency or currency pair that will suit everyone equally. This is because they are well-explored as compared to their contemporaries.

Why are liquidity and volume important to Forex traders?

After the announcement, all USD pairs usually spike up or down. There’s a long history of trade between the United Kingdom and the United States. The pound is the base currency, and the dollar is the quote currency. Even though you are selling the currency pair, you are, in effect, buying the dollar in anticipation of the price of the currency pair falling.

This country has also shown low inflation rates over the past years. Despite the fact that the US Dollar is considered by many to be less stable, it still has the status of the world reserve currency and its popularity is beyond question. Even a small change in fees can seriously cut into your trading profits. Keep in mind that some brokers also charge account maintenance fees or only offer limited features and research tools with free accounts.