Stepping into the realm of forex trading, one of the first and foremost concepts you’ll encounter is forex pairs. Naturally, you might wonder if there’s a single best forex pair to trade. When I first dipped my toes into the vast ocean of trading research, that question bugged me to no end. There were so many options, and deciding seemed impossible.
But don’t sweat it! This blog is here to help guide you through:
- Understanding what a forex pair is.
- Getting familiar with the major forex pairs.
- Evaluating which forex pair is optimal for trading.
- Discovering how to effectively trade these pairs.
1. What is a Forex Pair?
To put it simply, a forex pair is exactly what it suggests—a pairing of two currencies. Take, for instance, the USD and JPY. Together, they form the USD/JPY pair, which happens to be one of the most widely traded combinations. The magic of forex pairs lies in their comparative nature. Evaluating a single currency’s value in a vacuum is tough, but paired with another, like in USD/JPY, we can gauge how strong one is relative to the other.
Imagine getting a school report card—not too meaningful until you see how your grades stack up against Tom, that kid who always completes extra credit assignments.
And no, you can’t switch them to JPY/USD just like that. There’s a specific order, ensuring consistency and understanding across traders worldwide.
2. What Are the Major Forex Pairs?
a. The Big Boys
Think of forex as an academic setting—you’re always comparing your progress with Tom’s. In trading, it’s similar. Starting with the major pairs, here’s the lineup: EUR/USD, USD/JPY, GBP/USD, USD/CHF, AUD/USD, USD/CAD, and NZD/USD. Notice what they all share—USD. These pairs dominate thanks to immense liquidity. This means…
- Greater stability.
- Lower spreads, which are critical for frequent traders.
Given reasons like the USD’s global reserve status and the clout of the US economy, these pairs are pivotal in the forex market.
b. The Wild West
Sure, the term ‘Wild West’ might seem dramatic, yet it reflects the broader forex spectrum beyond majors. Meet the Cross Currency Pairs and Exotic Crosses. The cross pairs exclude the USD, allowing seamless non-USD currency exchanges.
When folks talk about "28 Major Forex Pairs," they’re generally referring to a mix of both the majors and the crosses. Then, you have the Exotic Crosses, comprising currencies from less dominant or emerging economies. These tend to have less liquidity.
3. Which Forex Pair is the Best to Trade?
Ah, the timeless puzzle! Everyone dreams of finding that magic forex pair to secure early retirement. But before you chase this dream, liquidity is key.
Liquidity in trading speaks to how easily you can buy or sell without affecting the price. In markets, liquidity offers perks such as:
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Tight spreads: A scalper’s must-have, as narrow spreads significantly enhance risk-to-reward calculations.
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Lower volatility: Shields you from unexpected market spikes or drops, safeguarding against unforeseen risks.
- Stability: A liquid market benefits technical strategies because widespread participation creates clearer patterns.
Guess which pairs top the liquidity charts? The Forex Major Pairs.
4. How to Trade Them
Just as an F1 driver would outperform anyone piloting a regular car, trading success isn’t solely about picking a pair. It’s about understanding the market and applying a versatile strategy, even for the more volatile pairs.
For our Urban Forex followers, it’s the art of reading the ebb and flow between sellers and buyers. If you’re new, our free price action course is a fantastic start to elevate you into an ‘F1 trader.’ Remember, the real edge lies not in which pair you choose but in your approach to trading it.
Conclusion
Now, of course, you want to stick with the forex pairs we’ve discussed. Whether you’re eyeing the Majors, Crosses, or Exotics, there’s no need to limit yourself. With a solid strategy, you can navigate all 28 forex pairs seamlessly.
So, here comes the tricky part—what’s your go-to forex pair? Let’s hear it!
