The Forex or foreign exchange market is particularly dynamic. Every day, it records transactions valued at more than four trillion dollars. The success of this sector is largely due to the ease with which orders can be executed. But to get started in Forex, you also need to know how to choose the currency pairs on which to trade. Here are some tips to help you do this.
On which currency pairs to trade as a beginner?
First of all, it is important to know that not all currency pairs are equal and some are more interesting and easier to trade. This is due in particular to low spreads, the absence of slippage or specific economic conditions in the issuing country. The rule for those starting out in forex is simple: you must bet on major currency pairs.
Know the major currency pairs
Major currency pairs are simply the most liquid in Forex (but also the most popular). They are made up of the main currencies, namely the euro (EUR), the US dollar (USD), the pound sterling (GBP), the Australian dollar (AUD), the yen (JPY), the Canadian dollar (CAD) and the Swiss franc (CHF). These currency pairs are found in more than eight out of ten Forex transactions.
Most of the countries that issue these currencies have a fairly stable economy. And even if we have seen some slowdowns over the years, their currencies are among the most popular in the Forex world. Here are the 6 most popular pairs on the foreign exchange market:
- EUR/USD ;
- GBP/USD ;
- USD/CHF ;
- USD/JPY ;
- USD/CAD ;
It should be noted that currency pairs with the dollar are highly valued: traders agree that it is easier to speculate on this as the US dollar is highly stable and is considered a standard currency.
In any case, major currency pairs have many advantages. First, they are more liquid. Second, their interpretation is simple. Finally, these are reliable values. Beginners have every interest in turning to its pairs to limit costs, but also risks. Brokers such as ETX Capital or NessFX offer these pairs with particularly low spreads.
Beware of “exotic” currencies
In addition to major currency pairs, there are exotic currency pairs that are composed of less “popular” currencies. Examples include the Brazilian real (BRL), the Chinese yuan (CNY) and the Mexican peso (MXN). With such currencies, traders should expect some complexities. First, it is often difficult to obtain information. As a result, analyses and observations are not always reliable and fluctuations can be unpredictable. In addition, spreads are often high. Given the risks involved in these exotic currencies, novice traders should leave them aside until they gain more experience and knowledge about the foreign exchange market.
For more information on currencies and Forex trading do not hesitate to consult our new folder to start trading on the Foreign Exchange market.