Published on October 28th, 2020 | by Sunit Nandi0
Which Forex Pairs Should You Buy And Sell?
Today, brokers give access to dozens of currency combinations traders need to choose between majors minors and exotics. The task is not always easy. to trade any currency pair, you need to learn the dynamics that set its rate in motion. So, which combinations are the best?
Your choice should be based on volatility, liquidity and a general understanding of local financial systems. Discover the intricacies of buying and selling forex on https://trade-in.forex/basics-of-buying-and-selling-forex, and incorporate them in your strategy. As most pairs include the USD, knowledge of the American economy is crucial for the vast majority of traders. The most popular world currency makes any pair more liquid.
Majors or Minors?
Major pairs are highly liquid, so buyers and sellers have no problem connecting online. The most popular choices today include:
- GBP/USD and
The system can easily find a match for your order, so you can secure a desirable price. While Minors do not usually include the USD, they still represent strong economies like Switzerland, Australia or New Zealand (e.g., AUD/CHF).
Some combinations are more volatile than others. For example, EUR/USD is fairly stable in comparison with GBP/USD. The higher the volatility – the more you may profit from short-term ups and downs.
Are Exotics Worth Considering?
Exotics are known for their erratic behaviour and lack of liquidity. These combinations represent emerging economies. Such systems are often associated with political unrest and general instability – hence the volatility of rates.
Due to large price swings, you may potentially earn (or lose) a lot. The key is to understand the dynamics of the local economies. For example, somebody trading the USD/ZAR should keep track of the condition of the South African economy, as well as the health of the dollar.
Importance of Forex Strategy
In theory, you can profit off any instrument if you know how it works. Develop a comprehensive strategy to limit potential damage. Forex is always risky, and the more reckless you are the more you can potentially lose. Keep a trading journal, and note down all parameters of every trade, including its risk level. Avoid putting more than 1% of your capital at stake per trade. This principle must be followed rigorously.
Any expert will tell you that spreads should be as tight as possible. This term describes the difference between the ask and bid price. Look for values between 0 and 3 pips. Anything over 6 pips is too expensive and may result in a sizable loss. Develop a solid risk management strategy before taking any action in the live market.
The Bottom Line
Unfortunately, there are no shortcuts on Forex. Trading is always risky, as exchange rates are affected by myriad factors. Generally, the higher the liquidity the easier it is to trade a pair. The more you know about the components of your instrument – the more likely you are to succeed.