Trading currency pairs on forex
In forex trading practice, currency pairs are usually divided into two categories:
- "major pairs" (pairs that invariably include USD); - "crosses" (forex pairs formed without USD).
The most popular currency pairs at Forex market are EURUSD, GBPUSD, AUDUSD, NZDUSD, USDCAD, USDCHF and USDJPY.
Best currency pairs for forex trading
Of course, the most popular currency pairs for forex trading are the currency pairs belonging to the 'major' category. It should be noted that this popularity has obvious reasons.
Firstly, it is due to the popularity of USD as a world currency, which performs at least two key functions in the system of global finance:
- the currency of international transactions (settlements); - the currency of international reserves.
Secondly, major pairs are the most attractive for Forex speculators exactly in the market aspect for currency exchange transactions. Trading in major currency pairs at Forex is almost always accompanied by high liquidity. It has the highest turnover and business activity, which is very important for a variety of trading sessions which take place in the currency market as the respective time zones alternate.
Multinational companies, Central Banks, and other major financial institutions are constantly exchanging currencies. It is natural that a European currency, for example, will be more in demand by some Central Bank than the Ethiopian Rand.
While brokers allow about 170 various assets for forex pairs trading, about 80% of the trading volume is traded on the "Majors" - the seven major currency pairs
Thirdly, the major currency pairs are considered to be the most convenient for fundamental analysis. There are a lot of significant events and news, and factors connected with US economy are in the focus of attention.
Fourthly, as practice shows major currency pairs are reliable tools in forex trading for beginners as they are ideal for traders who are not yet very experienced and allow them to combine aspects of fundamental and technical analysis in practice.