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Forex Currency Pairs

4 Mins read

Перевод Статьи: Forex Currency PairsFrançais Forex Currency PairsPortuguês Forex Currency PairsРусский

One of the simplest and most understandable financial assets on the exchange is currency pairs, which are often chosen for trading by beginners. However, when entering the terminal for the first time, many debutant traders with no trading experience do not know which currency pairs to choose on the exchange.

Often, when faced with the difficulties of choosing, beginners stop at the EUR/USD pair, which is the most familiar. The second common mistake is to try to cover and trade all Forex trading pairs. Experienced traders do not advise you to do this – it is better to start carefully, trading little by little.

What does a currency pair mean?

How to choose the right currency pairs for beginners? First, we need to understand what this concept is. So, a currency pair is the main financial instrument in the international market, assuming the ratio of 2 national currencies expressed in quotes.

Each such pair includes the main currency in 1st place, as well as the quote currency. The main currency is the one that is sold or purchased for another currency in a certain combination. At the same time, such pairs are designated by the names of the currencies included in them.

For example, in one of the most common and popular EUR/USD pairs, the euro is a commodity and the US dollar is money. The value of this currency pair shows how much American money you need to pay for 1 euro. All other currency pairs are named in the same way.

It should be borne in mind that the name of each pair consists of three letters. The most common ones are as follows:

  1. The euro currency is EUR.
  2. U.S. Dollar – USD.
  3. The Australian dollar is AUD.
  4. Pound Sterling (UK) – GBP.
  5. Yen (Japan) – JPY.
  6. Yuan (China) – CNY.

In total, about 170 currency pairs are traded on Forex. However, the main trading takes place using approximately seven pairs.

Selection of Currency Pairs

It should be noted that all currency pairs play a crucial role in the global economy – they affect the indicators of the gross domestic product, exports/imports and are considered the main financial instrument for trading on the stock market. It is noteworthy that for shareholders, such pairs can be a share of diversified portfolios.

Which trading pairs should a first-time trader choose?

What are the best currency pairs for beginners: Initially, it should be borne in mind that all pairs with which a beginner can start trading are divided into 3 basic groups:

  • Majors (the main instruments for trading);
  • Crosses (cross-rates);
  • Exotics (exotic currency pairs).

Basic pairs are the most predictable. The main pairs in the international currency market are the combinations that are most often chosen for trading. They are called major currency pairs.

Pairs with the US dollar are considered to be the most liquid – most trading transactions in the market are made with the participation of such financial instruments. When there is no US dollar in the pair, these are cross rates, which are characterized by a large difference between buying and selling (spread). This is due to the fact that in currency pairs, initially the commodity (the currency worth the first) is converted into dollars, and then dollars are converted into the second currency.

For example, cross rates include combinations such as EUR/AUD, EUR/GBP, AUD/CAD, CAD/JPY.

As for exotic pairs, they have almost no impact on the state of the market. In most cases, they are illiquid and have a large spread. They are used in states to which the currencies included in the pairs are national.

It is noteworthy that the most popular currency pairs are those with low spreads (EUR/USD, AUDUSD, EURGBP, USDCHF).

Experts who have been trading in the market for a long time are sure that it is better for beginners to start with trading basic major pairs. In any case, in order to get income for an inexperienced Forex player, it is optimal to use combinations where there is an American dollar.

But it is better to postpone trading with exotics until sufficient knowledge and practical experience have been accumulated for this. After all, to do this, it is important to calculate how the rate will behave in different situations. And only professionals can do this. In this regard, beginners are not advised to trade the so-called “complex” pairs.

It is worth noting that when choosing currency pairs on the Moscow Exchange, debutants should take into account the fact that profit is possible only in trading those pairs that are well known to the trader. At the same time, it should be borne in mind that before you start trading in a competitive pair, you need to know exactly about the economic indicators of the state whose currency is included in the snatched currency pair. The average trading volume, volatility, volatility and activity indicators of the pair are also important. At the same time, take into account the news that can affect the movement of this pair and price levels.

Trading Currency Pairs

When should I trade currency pairs?

Once a beginner has chosen currency pairs online, you need to know when to trade. Experts note that it is necessary to carry out such work when currency pairs are at their most active. Another important point is to try to trade a pair whose currencies are national for your country.

When a newcomer is good at trading a certain pair of currencies, he can try to master a new combination. This will help you carefully introduce another tool into your trading arsenal.

In addition, over time, you can try to trade currency pairs in the American session (from 13.30 to 20.00). It has the highest daily liquidity, as players from Europe are still active during this period. It is also the most volatile. By the way, during this trading session, there are no specific currency pairs that are recommended to be traded.

However, remember that you should not overload your brain with excessive information too quickly in an effort to make a profit. After all, in order to be successful, a trader needs to think accurately and calmly, and make decisions deliberately.

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