Choosing The Right Forex Pair

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Choosing The Right Forex Pair

Choosing The Right Forex Pair

Forex trading is volatile and interesting. It is equipped with high liquidity and calls for choosing the right currency pair to open a winning trade. It is key to get good returns and the prominent pair is EUR/USD.

Currency pair refers to the quotation of two currencies at their exchange rate. The first currency is the base currency while the second one is called quote currency. A trader either buys or sells the base currency against the other one. In the example of EUR/USD, the euro is the base currency while the United States dollar is the quote currency. Base currency is expressed as buying or selling while quote currency represents the price of the base one. If the EUR/USD exchange rate is 1.1270, it means 1 unit of euro will cost 1.1270 USD.

Forex is the largest financial market in the world and can be traded 24-hour a day from Monday to Friday. It features a plethora of currency pairs and the major pairs constitute the maximum trading. The eight major currencies are often traded.

The eight major currencies are EUR, USD, NZD, GBP, CHF, JPY, AUD and CAD. The Chinese yuan (CNH) is not actively traded even though is logical to add to the list as it is controlled mostly by the Central Bank of China.

EUR/USD is the most popular pair and is widely traded in great volume. The spread is low and it is highly volatile. It is mostly traded during the American and European sessions. Its exchange rate is highly sensitive to the news of the Eurozone.

Simultaneously, USD/CHF is widely traded and often equal to EUR/USD with respect to volume. With a small spread, its movement is calm. CHF (Swiss franc) is considered a safe-haven asset and this is the reason it goes down during the period of crisis. The pair is mostly traded during the American and European sessions.

GBP/USD is popular among traders. It has increased popularity and frequently demonstrates good movements. It dramatically reacts to the British economic data and political events. It is active during the American and European sessions.

As the Japanese yen is considered a safe-haven asset, the popularity of USD/JPY is wide. It usually declines during the crisis period and grows when the stock markets are doing well. It is mostly traded during the business hours of Asian markets.

USD/CAD, NZD/USD and AUD/USD are simultaneously traded in good volume. CAD is known as a commodity currency and its rate is driven by oil prices. The Australian dollar is influenced by powdered milk and metal prices.

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