With more than 200 countries available in the forex market, traders have a wide selection of currencies to choose from. However, there is no guarantee that every currency available to trade will yield profitable outcomes. So, how do you choose the best currency pairs to trade？ Whichcurrency pairsdo most traders choose to trade？ What makes them worth trading？ This article discusses the best currency pairs to trade for beginners in 2022.
The Best Currency Pairs to Trade as a Beginner
When you are just starting out in the Forex market, it is best to stick with trading the major currency pairs. As you gain more experience in the market, you can start trading with other pairs as well. A beginner can certainly experience ample losses if they encounter some unexpected pairings. The major currency pairs are always preferred since the market movements are easy to predict and you will be able to make consistent profits by understanding their nature.
Major Currency Pairs – Best for Beginners
Major currency pairsrepresent the most stable and prosperous economies across the globe and offer low spreads that accurately reflect market prices, making them especially appealing to forex traders. Forex beginners often trade major currency pairs as opposed to the less popular ones.
The 7 major pairs are EUR/USD, GBP/USD, AUD/USD, NZD/USD, USD/CAD, USD/CHF, and USD/JPY.
Characteristics of the Major Currency Pairs:
To be successful in the Forex market, you need to understand the different currency pairs you trade with. You can simplify your trading process by selecting the major currency pairs since you will be able to access plenty of expert analytical advice and data.
1.EUR/USD– The Fiber
EUR/USD is the most popular and most commonly traded pair in the forex market. The pair also features the lowest spread in todays market. The best thing about the EUR/USD currency pair is that its volatility is low. This makes it an excellent place for forex beginners. As a result of its popularity, you can find a lot of information online about the EUR/USD, which can help you avoid making mistakes.
2.GBP/USD – The Cable
Profitable pips and the possibility of large jumps have contributed greatly to the popularity of GBP/USD. However, you should realize that higher profits come with a higher risk. Traders describe this currency pair as volatile. However, many Forex traders choose this as their favourite trading pair due to its market analysis capabilities.
3.USD/JPY – The Gopher
The USD/JPY pair is also one of the most widely traded currencies in the forex market because of the prominence of the JPY in Asia and the USD globally. There is a high level of liquidity in this currency pair, so traders can buy and sell it in large volumes without it fluctuating too much in its exchange rate. Furthermore, it has one of the tightest spreads in the forex market, reducing the overall cost of the trade.
4.USD/CHF – The Swissie
The USD/CHF has long been a ‘safe haven’ for forex traders, especially during volatile markets. Therefore, this forex pair is popular among traders when the economic or political situation of a region is uncertain. Despite the fact that the USD/CHF pair is one of the most stable currency pairs to trade and offers many advantages, forex traders prefer to trade other major currency pairs when markets are more stable.
5.AUD/USD – The Aussie
The AUD/USD pair is very suitable for long-term forex trading strategies since it is a steady and slow-moving currency pair. It is most active during the Asian trading session and less active during the New York and London trading sessions. AUD is closely correlated with commodity prices, as AUD is one of Australias leading commodities, as a major exporter of iron ore, coal, gold, and aluminium.
6.USD/CAD – The Loonie
USD is the quoted currency here, so this currency pair correlates negatively with the AUD/USD, GBP/USD, and EUR/US. The U.S. and Canada are neighbouring countries with tremendous trading volumes, reflecting the fluctuation in prices of this currency pair. As Canada is one of the largest exporters, keep an eye on oil prices. You should monitor the oil prices to determine when to buy the Loonie.
7.NZD/USD – The Kiwi
The NZD/USD pair is best suited for forex swing trading strategies due to its back-and-forth price movements. Along with the Australian Dollar and the Canadian Dollar, the NZD is a commodity currency, meaning that its exports mainly include raw materials (precious metals, oil, agriculture, etc.). Since the NZD has also been a traditional vehicle for forex traders, it is very sensitive to changes ininterest rates.
These are the best currency pairs to trade in the forex market. Despite the fact that many traders prefer different lists of major currency pairs, GBPUSD, USDJPY, and EURUSD tend to be on most traders lists as the best currency pairs to trade.
Minor and Exotic Forex Currency Pairs
Given the information presented above, we can conclude that the major Forex pairs contain the most heavily traded currencies, all of which include the US dollar. While the major currency pairs generate most of the trading activity, there are also minor orcross currency pairsthat traders invest in.
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EUR/GBP
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GBP/JPY
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EUR/CHF
The third type of currency pair is the exotic currency pair, which includes currencies from emerging economies. Exotic pairs tend to have the lowest liquidity and the highest spreads. Examples of these exotic pairs include:
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USD/CLP – US dollar/Chilean Peso
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EUR/RUB – Euro/Russian Rouble
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GBP/SGD – British pound/Singapore dollar
Theseexotic currency pairsmainly involve currencies of emerging economies such as the Mexican Peso USDMXN (Mexican Peso), the Russian Ruble USDRUB (Russian Ruble), and others. Exotic currency pairs tend to be more volatile and less liquid than minors, which can result in higher transaction costs for forex traders.
Factors to consider when picking the best currency pairs to trade
To become successful in forex trading in the long run, a beginner should try to take as little risk as possible when trading Forex. Below are some important things to consider when choosing the best currency pairs to trade.
1. Liquidity & Volatility:
From a traders perspective, liquidity refers to how easy it is to enter or exit a trade. During periods of high liquidity, the best currency pairs to trade are the ones with lower spreads.
On the other hand,volatilitymeasures how far a currency pair deviates from its average price. The forex markets consist of different currency pairs, each of which is characterized by different levels of volatility. Beginners in forex trading should be aware that volatility can undermine their strategies. A trading strategy that may work for one currency pair may result in losses if it is not tailored for another currency pair.
2. Fundamental and Technical Analysis:
You have to upskill yourself every day if you are to become a master of anything. Forex traders can accomplish this by staying informed at all times. They need to be disciplined and patient to achieve success. Forex traders should base their trading strategies either on fundamental analysis or technical analysis.Since there is always a correlation between a currencys strength and the economic strength of its country, it is crucial to keep yourself informed of market directions.
A countrys position can be affected by a variety of factors such as political stability, monetary policies, GDP, interest rates, and more. Traders who strategize their trades based on fundamental analysis constantly monitor these factors.Meanwhile, technical analysis focuses primarily on indicators, price action, and/or financial instruments of the country. This is done to predict future price movements.
Finding a reliable broker increases your chances of a successful analysis. As a reputable broker, Aximtrade provides its traders with weekly market outlooks and technical analyses to assist them better with adequate market information and valuable insights. Check the fullAximTrade Reviewto find out how Aximtrade sets itself apart from its contemporaries in the financial market.
3. Reliable Trading Platform:
Nowadays, all transactions take place virtually; as a result, you need a reliable and trustworthy trading platform. An unreliable trading platform may have a negative impact on your trading. Imagine you have a great trading strategy and plan, but your platform goes down right as you are about to execute a trade.
It is highly recommended that you find a regulated broker with a user-friendly and efficient trading platform. MetaTrader is the most popular Forex trading platform. The MT4 platform isavailable worldwide and comes with a variety of useful technical indicators to help you analyze charts.Open a forex accountnow with AximTrade MT4 and turn your learning into profit with reliable trading conditions and flexible leverage.
Despite the fact that there are many best currency pairs to trade, it is highly recommended that you trade most of them before you choose one to focus on. To practice before risking your own capital in Forex trading, you can first open a demo or aCent account, which will allow you to learn with a small investment. Make sure you thoroughly study the foreign exchange market before making an investment.
Original Article:Beginners guide: Best Currency Pairs to Trade in 2022
Disclaimer:This post is from Aximdaily and it is considered a marketing publication and does not constitute investment advice or research. Its content represents the general views of our editors and does not consider individual readers' personal circumstances, investment experience, or current financial situation.
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