The Best Currency Pairs to Trade as a Beginner

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What are currency pairs? If you are just starting out in the Forex market you may have become inundated with jargon. Pips, leverage and spreads may sound complex. Forex is actually one of the easiest investments for a beginner to understand if you purely think of it like this: These are simply known as currency pairs.

When you invest in a currency pair you are betting that one will do better converting into the other one. Forex always includes two currencies. The common comparison is to think of forex currency pairs for beginners like going on holiday and exchanging currencies.

The most forex currency pairs for beginners currency pairs are known as major currency pairs. In this guide we will introduce the top currency pairs to you and explain how they work and why or why not they may be a worthy fit for you as you get started. That means in this pair that one United Kingdom Pound will buy 1. Learning how to read currency pairs is easy.

The first currency in this forex currency pairs for beginners the GBP is known as the base. The second currency in this case the USD is known as the forex currency pairs for beginners, or sometimes called the counter currency.

The spread is usually recorded as the fourth decimal position, but sometimes fifth and in the case of the Yen, at the second.

This is known as a pip. In this example the pip will be the number six as we see it in the fourth decimal position. If the currency gained to 1. Profits or losses are realised by the number of pips gained or lost. There are seven majors from the currency pairs list. They are probably the best fit for a beginning Forex trader due to their liquidity and relative stability. It is the most popular and most traded currency in the world.

When these two countries butt heads economically, generally stronger data from either will propel it over the other in the spread. Even though it is one of the most popular and consistent currencies pairs in Forex there are always rumors floating around about The United Kingdom joining the Eurozone. There are pros and cons to either decision, which the British Government hashes out regularly.

Trading opportunities often exist when this discussion gets heated in Parliament, with a move to the Eurozone to be seen as devaluing the British Pound. It is unique on the list of major currency pairs for this reason. Germany and France represent the strongest economies of this young economic experiment that only began in This unique situation brings an interesting opportunity for the USD to rise relative to the EUR based on problems associated with individual Eurozone countries like Greece or Italy.

On the base side of this pair, a fledgling American economy can lead to a relative rise of the EUR. Interestingly many American companies are headquartered in the Eurozone for the benefit of tax relief, while many Eurozone companies have a powerful economic presence in The United States. This has a puzzling impact on the spread. Either way this is a great currency pair for beginners as it features some of the lowest bid-ask spreads in Forex as well as high levels of liquidity.

Thus, Japan is highly reliant on imports and exports. Although the Yen suffered horribly in the s due to a deflationary trajectory that the country has still forex currency pairs for beginners completely recovered from, it is still a safe trade for beginning Forex investors.

Carry trades are a favorite technique for this popular currency pair. It is a trading technique that seeks to sell a low interest rate currency and use the difference to purchase a higher interest rate currency, often with the use of leverage from their broker. The big risk involved in a Yen carry trade is the assumption that the exchange rate will not change.

As an important side note, in JPY based trading, the pip is represented at the second decimal point, instead of fourth. Once known as the most neutral country in the world, Switzerland still remains relatively autonomous. Yet the Swiss Bank, known for its financial secrecy allows for one of the best currency pairs with the USD.

This main pair offers a wonderful opportunity for the beginning trader as both currencies are often touted as the safe choice during times of global economic fears. Outside of those fears, during times of relative global stability and success, the Swiss Franc correlates well to the Euro.

The Canadian Dollar, known as the Loonie is a resource based currency. As the price per barrel rises or falls so does the Loonie. In addition Canada relies heavily on mineral exploration and processing both at home and abroad namely in nickel, copper, and gold. Thus the long term spot price for these precious metals can have a long term impact on this top currency pair.

Australia, like its neighbor New Zealand is geographically isolated from much of the industrial world, requiring more expensive imports and making exports that much more difficult. Nevertheless, Australia, like Canada is a resource rich country with some of the largest holdings of gold, coal, iron and other commodities in the world.

The perimeter of the country is complimented with large wheat and beef farms that account for a sizable portion of exports. The Aussie Dollar is often correlated with the price of gold and the smaller population of such an immense country does make it one of the less liquid major currency pairs. New Zealand is a small island country off the coast of Australia that shares many of the same problems and successes of its neighbor. New Zealand, unlike the resource deficient island of Japan, is a country blessed with mineral resources, livestock, and a relatively open system for trade that is encouraging to other countries.

Although this pair is tightly bound to forex currency pairs for beginners commodities market, New Zealand has made a concerted effort to ramp up its technology services sector and tourism, which have both grown substantially in the last 20 years. Above we looked at the major currency pairs from the perspective of the quote.

In general the USD rises and forex currency pairs for beginners compared to other currencies on news of growth or lack of growth from a number sectors or forex currency pairs for beginners at the national level. Examples including jobless claims might have an impact as well as the manufacturing PMI.

Both have a direct impact on the national economy and the Forex currency pairs for beginners States global output. Overall, the greatest indicator for the potential rise of the USD is a hike in the Federal interest rate. Although majors are the most forex currency pairs for beginners currency pairs there are a number of reasons investors may decide to trade outside of these pairs. The most simple reasons not to trade the major pairs is that you have a better understanding or market insight into another currency forex currency pairs for beginners that does not involve the USD.

This is known as a Pound cross. A cross is simply a pair that does not contain the USD. The first currency known as the bid takes the name for the cross. Like so many other investment options, high risk and high reward exist in Forex, often in the form of exotic Forex currency pairs for beginners pairs. Just because they are known as exotic pairs does not mean they are necessarily from beautiful tropical countries!

These pairs are traded less frequently, therefore there is often less research available and some brokers may not make the trade available in an exotic pair. Even if they do, one has to be careful in using leverage with these pairs, since unlike stocks, losses can be indefinite. Unlike the exotic pairs, major currency pairs are constantly covered by the leading financial media.

Thus, as a beginning trader you are better informed on how to invest in major currency pairs. Not only that but, the exotic pairs might invite unwanted risk from unstable or totalitarian governments who may manipulate their currency on a whim.

Sticking with a highly liquid and in demand currency prevents you from being a victim. Finally, it is still highly recommended that a beginner Forex forex currency pairs for beginners stick with the major currency pairs. They are often the most reliable currencies in the world and are less likely to have a dramatic change in the spread. In addition, trading currency pairs that frequency enables that stability, whereas exotic pairs which are trading infrequently might have major shifts.

If you still want to give exotic pairs a try — best to do it on a demo trading account. Remember in the Forex market, no matter what FX currency pairs you are trading, you are hedging a bet on one currency over another. When you place your investment, you are using one currency to obtain another at the spread rate. In this case, we can do it all at the comfort of our home computer with a much more friendly spread. Plus we have the best Forex booksresearch, and dedicated broker to allow us to make some safe investments in some of the major currency pairs and maybe a few more volatile investments with the exotic or cross currency pairs.

We recommend you to trade with reliable brokers. Read Plus Review to find out why this broker is a perfect choice for you! Major currency pairs explained There are seven majors from the currency pairs list. Understanding forex currency pairs for beginners pairs and their liquidity Above we looked at the major currency pairs from the perspective of the quote.

Other currency pairs Although majors are the most common currency pairs there are a number of reasons investors may decide to trade outside of these pairs. Summing it all up Remember in the Forex market, no forex currency pairs for beginners what FX currency pairs you are trading, you are hedging a bet on one currency over another.

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The choice of the best Forex currency pairs to trade is not a walkover, as it might seem at first glance. The main factors to consider when choosing the best currency to trade include volatility, spread, trading strategy and the level of difficulty of forecasting the course. There is a huge variety of currency pairs available for trading in the Forex market. Apart from them, there is a large number of other popular currencies. So what currency pairs are the best currencies to trade in Forex, what tools are to be excluded from your portfolio?

The top currency pairs are characterized with the highest liquidity of transactions, global popularity and a huge number of players. By the way, the prize of spectator sympathies, no doubt, would also have been accrued to it. It accounts for over one-third of the total volume of transactions on Forex. This is due to various factors, the main of which are the scale and transparency of EU economies and the US.

High liquidity of the instrument, which determines the favorable conditions of conclusion of transactions. Therefore, it is popular and the most traded currency amongst professional traders focused on short-term aggressive strategies.

The pair quotes are sensitive to fundamental factors and statistical data on the state of the British economy and the actions of the Bank of England, as well as to macroeconomic data in the USA. The pair have high volatility, allowing you to maximize profit on short time periods. In addition, a higher rate of the Bank of England compared to the U. Federal reserve allows financial market participants to use the pound sterling as a tool for medium and long — term investments. It is undoubtedly, one of the best currency pairs to trade.

They are held out as commodity currency pairs, as their prices are closely correlated with gold and oil. Cross-currency pairs Crosses , i.

From the point of view of trading activity, they are behind. This group includes the following popular currency pairs: This list is not exclusive, as there are more traded currency pairs.

Of course, not all of these popular cross-currency pairs should be used in trading. Exotic pairs Exotics , i. These currency pairs are characterized by low liquidity, high volatility, high spread and risks. Profitability of transactions on these assets is inevitably susceptible to decline because of the exotic currency pairs are poorly amenable to technical analysis, and forecasting of their trend is very difficult. They are no not so many market participants, who trade them, and usually these are the representatives of the countries concerned.

Beginners are not recommended to trade many currency pairs at the same time. Specialization in one or two instruments gives much better results, and knowledge of successful trading on the major and most traded currencies in the world. You can gradually expand your trading portfolio with new currency instruments. Concentrate on the most simple and quite popular currency pair, and it will bring you profit subject to observance of other Safe trading rules!

Even the most seasoned professionals have been known to accidentally buy instead of sell or trade the wrong quantity or even the wrong security from time to time Social trading is the most exciting way of trading, it's fun, and it's the easiest way to make profits and big money in the forex world.

By using the social trading, the trader can benefit from other trader's skills, also he can make a profit from Company fundamentals, such as the amount of money the companies earns and how efficiently they utilise their resources, drive the share and CFD markets.

Traders buy companies they believe One can never emphasize enough the importance of money management skills. No matter if we are talking about taking care of your personal finances or choosing the right size for a trade - money Typically short-term, speculative trades are generally coupled to major market events such as central bank interest-rate decisions and company results. Traders want to capitalize quickly through a timely So it seems that Japanese are not only good turning raw fish into tasty overpriced pieces of art called sushi.

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As noted above, the economy of the EU and the US are among the most transparent in the world. Favorable terms and conditions. Ability to predict price dynamics by the means of technical analysis, thanks to its high liquidity.

Sensitivity to fundamental factors. A wide range of fluctuations in the share price provides good opportunities for experienced traders. High liquidity of trading in the morning. Misuse of leverage Even the most seasoned professionals have been known to accidentally buy instead of sell or trade the wrong quantity or even the wrong security from time to time Social Trading Tips Social trading is the most exciting way of trading, it's fun, and it's the easiest way to make profits and big money in the forex world.

Fundamental Analysis Company fundamentals, such as the amount of money the companies earns and how efficiently they utilise their resources, drive the share and CFD markets. Speculating with CFDs Typically short-term, speculative trades are generally coupled to major market events such as central bank interest-rate decisions and company results. Top market news a trader should follow There are dozens of economic indicators that can impact the forex market, and many traders simply don't know which news move the market the most and which to dismiss Automated trading with Meta Trader Trading signals allow traders to copy operations of other traders who are signal providers.