Forex trading presents numerous currency pairs, though some of them offer more opportunities than others. The selection of the appropriate pairs influences the cost of trade, volatility and possible gains. This article brings out the best forex currency pair that a trader should look at. These pairs enable one to develop a solid background in order to succeed in forex trading.

Top forex currency pairs for traders to consider

Major currency pairs dominate the market

The major pairs include the US dollar against the other strong major currencies in the world and this is the most liquid and the least spread. These pairs have a predictable movement with the economic news, hence they are good when a beginner is concerned. The following are the major pairs that are significant and their attributes:

  • EUR/USD (Euro-US Dollar): This is the pair that has the tightest spreads, greatest liquidity and most apparent response to the US and European economic news.
  • USD/JPY (US Dollar-Japanese Yen): This is a pair that varies depending on the interest rate variations in the US and Japan and it is highly sensitive to developments in the risk sentiment.
  • GBP/USD (British Pound-US Dollar) : This is a volatile pair, which has big moves, however with wider spreads, which suit traders who want bigger price movements.
  • USD/CHF (US Dollar Swiss Franc): This is a safe-haven pair that is used inversely to the EUR/USD and responds to European political and economic events.
  • USD/CAD (US Dollar-Canadian Dollar): This is a commodity based pair that closely tracks the prices of oil because Canada is a major exporter of petroleum.

Cross pairs offer diversification away from the dollar

Cross pairs do not involve the use of the US dollar and this enables the traders to directly bet on the strength of one currency against the other. These pairs will tend to exhibit special movements that will not be associated with dollar based pairs. The following are the popular cross pairs that should be traded:

  • EUR/GBP (Euro-British Pound): The pair is an economic strong one that traverses between the Eurozone and the British, and tends to be contained within narrow corridors.
  • EUR/JPY (Euro-Japanese Yen): The pair is a blend of economic sensitivity of the Euro and the Yen as a risk-off safe-haven currency to exhibit peculiar movement trends.
  • GBP/JPY (British Pound-Japanese Yen): Is a volatile pair that presents enormous price fluctuations and is appealing to the traders with the potential of making a quick profit and tolerating the level of risk.
  • AUD/JPY (Australian Dollar-Japanese Yen): It is a very sensitive pair to the sentiment of the Asian market and the prices of commodities particularly the gold and the iron ore.

Exotic pairs offer high risk and high reward

The exotic pairs are the pairing of a major currency with a developing or smaller economy currency. These pairs are broadly spread and have the potential of moving in any direction but are profitable. The following are the found pairs of the advanced traders:

  • USD/TRY (US Dollar- Turkish Lira): The swings of this volatile pair are enormous on a daily basis yet the spreads and interest rates differentials are very wide.
  • USD/ZAR (US Dollar-South African Rand): This pair responds to the gold prices and the attitude of the emerging market, providing big movements and rather predictable trends.
  • USD/MXN (US Dollar-Mexican Peso): This pair will follow the same pattern as the trade relations between the US and Mexico and will be more liquid as compared to most other exotic pairs.
  • USD/PLN (US Dollar- Polish Zloty): This is a European exotics market that provides tighter spreads as compared to other exotics as Poland is an EU member.

Finally

The most advisable forex currency pairs to trade are major pairs such as EUR/USD when starting, cross pairs when diversifying in dollars, commodity pairs when playing the resource prices, and exotics when taking up high risk. The traders are supposed to pair the traders according to their trading session, risk taking and market knowledge. Beginning with large pairs and then venturing into exotics creates fundamental success skills in the long term of forex.