Currency Exchange Currencies: The Most Favorable Pairs

People starting in foreign exchange trading frequently don’t realize how many trading opportunities this gigantic market offers. It can appear overpowering to think that you can trade any combination of the world’s currencies.

Allegedly at least, a trader can deal in any pair: that is, any two of the 150 or so currencies of the Earth. Almost all nations have their own currency apart from the western european states who are part of the Euro system and a few little nations who use the US dollar. There are more countries whose currencies are attached to the buck to give them some economic stability. Still, there are lots of currencies out there, and in combination that makes a big number of currency exchange pairs.

In practice of course there are limits on the currency pairs that an individual trader can access. Most brokers will only let you deal with certain pairs, or if they quote prices on bizarre pairs then the spread will be high so you have a higher threshold to beat before you start to make money. If you would like to trade in a minor currency it is often best to do so through a broker who is based in that country.

However, for most traders this isn’t even a problem. The average currency exchange retail trader ( that is, somebody trading all alone account, regularly from home ) wouldn’t touch most minor currencies because they are too volatile. For anybody starting, certainly the most suitable choice is to stay with the major currencies.

So which currency exchange currencies would be portrayed as major? There may be some debate about this but most sources count 7 major currencies in order of their traded volume. They’re: US dollar - USD, euro - EUR, Japanese yen - JPY, British pound - GBP, Swiss franc - CHF, Canadian dollar - CAD and Australian dollar - AUD.

Major pairs are outlined as pairs of the US buck with any other major currency. This creates six major pairs which are EUR/USD, USD/JPY, GBP/USD, USD/CHF, USD/CAD and AUD/USD. Pairs of two major currencies where neither one is the US dollar are called cross pairs. This gives another 30 possible pairs. An example would be GBP/CHF.

The most heavily traded pair of forex currencies is EUR/USD. The high liquidity of EUR/USD has 3 main advantages. First, you will not have trouble getting matched including having stop losses matched at the intended point without lots of slippage. Second, the spread tends to be low because competition between brokers is intense for this pair. 3rd, there’s a ton of foreign exchange reports relating to these two currencies and you’re much less certain to miss some important announcement.

With all these factors coming into play, the advice for newbies is to keep to one pair and make it a biggest, EUR/USD. That is if you are trading for yourself. If you are using a robot, it may be set up for other foreign exchange currencies and you must go with the advised pairs.