The Forex market is the largest market in the world, where it trades almost 24 hours a day and has the largest trading volumes of all markets globally. There are many currency pairs available for trading. For a novice trader, the question that comes up very quickly is: What are the best currency pairs to trade?
The answer is not so simple, because for each trader, the best currency pairs for trading vary from case to case. A Japanese investor may prefer the yen, while a French investor is likely to prefer the euro against the US dollar.
Whether you are a beginner or an experienced trader, you will probably often be looking for the most profitable currency pairs and do not know where to start. And it is true that it is difficult to make the choice, but you should not be impatient given the fact that there are certain clear criteria that must be met in choosing the currency you want to trade.
In this article we will analyze which are the most traded currency pairs, which are the major currencies, which are the minor ones but also which are the exotic ones, how to choose a currency pair for trading and how to understand what volatility means in financial markets, which are currencies with the lowest spreads and those with the highest costs. You can also practice for free trading the most profitable currency pairs on your own, on a Forex demo account.
Forex Pairs – What Are The Most Traded Currency Pairs?
The Forex market is the largest financial market in the world and is the one that reflects quite clearly the financial dynamics of global transactions. All transactions consist of exchanges in different currency pairs: the currencies of different countries are exchanged in real time. To better understand what Forex quotes mean , what currency pair betting means and how the Forex market works, we invite you to read our article on the Forex market .
When trading the Forex market, you need to know which are the best currencies in terms of an investment that you make. In order to find the most traded currency pairs and also the most profitable ones for you, it is necessary for you to find the Forex strategy that suits you the most and to choose carefully the best currency pairs for trading. and decide carefully what are the best times to trade.
When you start trading Forex online, you may find that you are overwhelmed and / or confused by the large number of major currency pairs that are available in your trading account and on the MetaTrader 4 or MetaTrader 5 platform, which are offered to you free of charge by Online Tradings. If, however, you do not deviate from the set of major Forex pairs but from minor or exotic currency pairs, you still have a lot to do.
Trading on the Forex market – or on the currency pair betting market – is nothing more than buying and selling currency pairs or Forex currencies. For a currency pair buying and selling activity, ie currency pair trading, you need to have information about how much one currency that is part of that currency pair is worth depending on the other.
This relationship defines a currency pair. Such major or minor currency pairs are represented by the abbreviations of the two currencies, followed by the value of the respective currency relative to the base currency.
There is an international code that specifies the configuration for each currency pair, so also for the most volatile currency pairs. For example, a quotation of 1.23 EURUSD means that one euro is worth 1.23 USD (US dollars). Here, the base currency is the euro, and the opposite currency is the US dollar. This lists each currency pair in foreign exchange markets around the world.
The price of a quotation represents the price of the first currency in relation to the second. The names of major currency pairs, but also those referring to minor or exotic ones come from the first two letters of the respective country, while the third is given by the letter of the currency. For example: USD – United States Dollar.
Do you want to know which are the most traded currency pairs but also which are the most volatile currency pairs? Follow us.
Most Traded Currency Pairs – Major Forex Pairs:
The main currency pairs:
- EURUSD (Euro – US Dollar)
- USDJPY (US Dollar – Japanese Yen)
- GBPUSD (British Pound – US Dollar)
- AUDUSD (Australian Dollar – US Dollar)
- USDCHF (US Dollar – Swiss Franc)
- USDCAD (US Dollar – Canadian Dollar)
The most important currency of all, as well as the most traded, is the US dollar. The reason why this is true is due in particular to the size of the US economy, which is undoubtedly the largest economy in the world. The US dollar is the preferred currency in most Forex transactions around the world.
In addition, the US dollar is also the dominant reserve currency in the world. The dollar is not necessarily one of the best currency pairs to trade, but it is the currency pair that enjoys the most liquidity and is in the category of the most important currency pairs.
What are the values of currency pair quotes? Prices for the most volatile currency pairs, but also for the most traded currency pairs fluctuate in real time and depend on the volatility factor of currency pairs, with the volume of foreign exchange transactions related to the two issuing countries of those currencies changing every minute. These pairs are naturally associated with countries that have financial power and with countries that have a large volume of trade activities that are carried out worldwide.
In general, such pairs are among the most volatile currency pairs, which means that price fluctuations during the day may be the largest. Does this mean, then, that these are the best currency pairs? Not necessarily, because the volatility of currency pairs can mean a higher risk.
However, it is worth mentioning that you can protect yourself against market volatility . The main currency pairs above do indeed have the best trading conditions, such as spreads, but that does not mean that the set of major currency pairs would be the best in terms of Forex trading.
The set of major Forex pairs can be very profitable if we consider a short-term trading strategy, such as scaling Forex, because the low commissions related to trading activity allow you to make faster gains.
Indeed, it all depends on your trading strategy on major, minor and / or exotic currency pairs. If you want to trade the most traded currency pairs in terms of spreads, assuming you already have a scalping strategy, the most volatile currency pairs can be, in principle, the most profitable currency pairs in scalping or, as inappropriate to them. It is also said, the best tools that are chosen for betting currency pairs. The most traded currency pairs are, in fact, the majority of currency pairs, in terms of volumes traded in the market.
Can Minor Forex Pairs Be The Most Traded Currency Pairs?
Here are the minor currency pairs:
- EURGBP – Euro against the British Pound;
- EURCHF – Euro against Swiss Franc;
- EURCAD – Euro against the Canadian Dollar;
- EURAUD – Euro against the Australian Dollar;
- EURNZD – Euro against the New Zealand Dollar;
- EURJPY – Euro against the Japanese Yen;
- GBPJPY – British Pound against the Japanese Yen;
- CHFJPY – Swiss franc against Japanese yen;
- CADJPY – Canadian dollar against Japanese yen;
- AUDJPY – Australian dollar against Japanese yen;
- NZDJPY – New Zealand dollar against Japanese Yen;
- GBPCHF – Pound sterling against Swiss franc;
- GBPAUD – British Pound against the Australian Dollar;
- GBPCAD – British Pound against Canadian Dollar.
As there are over 200 countries around the world, you will be able to easily find a currency pair for trading. If you want to know the currency symbols in circulation, we invite you to consult the Forex Trading section of our website.
But not all of these currency pairs have the potential to provide the best results for traders. Minor currency pairs can be interesting for trading if you are a trader who focuses more on fundamental analysis and makes a longer term analysis.
Scalping on minor currency pairs is much more complicated to do, because the costs associated with trading are higher than those for the most traded currency pairs, ie those that are major currency pairs. This does not mean that there are no more profitable currency pairs in the category of minors. The most volatile currency pairs can be profitable if the trader is aware that risk management and an efficient trading plan are needed.
If you want to be successful in trading the Forex market, you need to have a better understanding of that currency pair you are trading. If you simply choose any of the pairs at random, chances are you are headed for disaster. Choosing the most profitable currency pair for you should be based on your knowledge, trading strategy and availability.
The most profitable currency pairs among the minor ones are those for which the difference between the interest rates related to the two currencies is large. The most profitable currency pairs on long-term strategies or on interest rate differential strategies are the Australian dollar, the Japanese yen or the Canadian dollar.
Analysis of the Most Profitable Currency Trading Pairs
Let’s take a closer look at EURUSD . It can be considered one of the most liquid currency pairs. In addition, this pair has the smallest spread at most Forex and CFD brokers. This currency pair is associated with a basic technical analysis.
The most important thing about this Forex pair is that it is not one of the most volatile currency pairs. If you are not able to take a certain level of risk, you can think of choosing this one as, for you, the best Forex parity for trading without having to worry too much later.
You can also find a lot of information about this currency pair, another aspect that can help you in the sense of preventing the mistakes of the novice trader in the Forex market.
GBPUSD – Spreads and gaps (price openings with previous price closures) contribute a lot to the popularity of this currency pair. However, you need to keep in mind that higher profits also have a higher risk. It is a currency pair that can be grouped into the most volatile currency pairs category. However, many traders prefer to choose it as the best currency pair for their trading activity because they can find a lot of market analysis information.
USDJPY – This is another currency pair that is quite popular with market participants and, as a consequence, that can be seen in the world of foreign exchange transactions. It is associated with low spreads and you can usually go for a trend that is more “smooth” compared to other currency pairs. This currency pair also has the potential to offer traders profitable opportunities.
All major currency pairs that can be found at Forex brokers (including Australian forex brokers) have extremely competitive spreads. However, this does not apply to the GBPUSD currency pair, due to its volatility. It is always better to stay away from currencies that have large spreads. The recommendation that trading experts make is that the spread should be in the range of 0-3 pips.
Once the spread exceeds 6 pips, the currency pair may become too expensive to trade, which can lead to higher losses. However, this does not mean that you should completely avoid any instrument that has high spreads and / or trading costs.
Exotic Currency Pairs
Want to know if it’s worth trading exotic currency pairs? You will find the answer below:
Here are some pairs of exotic coins:
- EURTRY – Euro against the Turkish lira;
- USDSEK – US dollar against Swedish krona;
- USDNOK – US dollar against Norwegian krone;
- USDDKK – The US dollar against the Danish krone;
- USDZAR – US Dollar against South Africa;
- USDHKD – US dollar against Hong Kong dollar;
- USDSGD – The US dollar against the Singapore dollar.
The most profitable currency pair is the currency pair that you know and use for trading. Another important aspect is to analyze the correlation between currency pairs , especially when trading exotic currency pairs.
Correlation is important in forex trading, so we suggest you do not hesitate to use the tools provided to you for free by Online Tradings, including the Forex Market Sentiment so that you can make a much more in-depth analysis. Sometimes, on exotic currencies, you can have a correlation between that currency and commodities, especially in emerging economies, ie those that are large exporters of goods.
Among the most volatile currency pairs are obviously exotic currency pairs, with a value that is much higher than that of major pairs and minor pairs. Exotic currencies are often the currencies of smaller countries in terms of economic activity or currencies of developing countries, such as: the Russian ruble , the Mexican peso, the Brazilian real, the Romanian leu, etc.
What is important to note is that the best currency pair is the one you are best informed about. This can help you a lot to trade, for example, the currency of your own country. It is often advisable to consider trading currency pairs that contain your local currency. In most cases, your currency pair that also contains the local currency will be quoted against the US dollar, so VAT will need to be informed against the US currency as well.
The Most Traded Currency Pairs – Conclusion Regarding Forex Currencies
The dynamics of foreign exchange transactions are interesting. Given that globalization is becoming an increasingly important issue for most countries around the world, the fate of these currency pairs thus becomes closely linked. Make sure you do your homework when trading major currency pairs.
There are many Forex pairs available for trading and it is important to trade on a demo account the respective financial instrument to know it as well as possible before you start trading on a live account, simply because this type of investment, which presents a leverage effect is risky.
Identifying the best currency pair for trading is not easy. The best way to do this is through your real market trading experience. All you have to do is open a demo account and start trading, performing technical analysis and fundamental analysis of the macroeconomic events that will occur. We suggest you never forget the phrase “practice always beats theory” …
To put into practice what you have learned through this article, open a Forex demo account and try to find out which are the best currencies for you to trade and at the same time find out what it means to trade CFD products.