People starting in currency trading regularly do not realize how many trading opportunities this gigantic market offers. It can appear overwhelming to suspect that you can trade any mixture of the planet’s currencies.
Allegedly at least, a trader can deal in any pair: that is, any a couple of the 150 or so currencies of the Earth. Just about all countries have their own currency apart from the european states who are a part of the Euro system and a few small states who use the US dollar. There are more nations whose currencies are pegged to the buck to give them some economic stability. Still, there are plenty of currencies out there, and in mixture that makes a big number of foreign exchange pairs.
In practice of course there are boundaries 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 unusual pairs then the spread will be high so you have a higher threshold to beat before you begin to make money. If you need to trade in a minor currency it is often best to do so through a broker who is based in that country.
For most traders this isn’t even a problem. The average currency exchange retail trader ( that is, somebody trading on their lonesome account, regularly from home ) wouldn’t touch most minor currencies because they are too volatile. For anyone starting out, certainly the most suitable choice is to stay with the major currencies.
So which forex currencies would be described as major? There can be some debate about this but most sources count seven major currencies listed by their traded volume. They are: US dollar – USD, euro – EUR, Japanese yen – JPY, Brit pound – GBP, Swiss franc – CHF, Canadian dollar – CAD and Australian dollar – AUD.
Major pairs are outlined as pairs of the US dollar 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 2 major currencies where neither one is the US buck 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 difficulty getting matched including having stop losses matched at the planned point without lots of slippage. Second, the spread is low because competition between brokers is intense for this pair. 3rd, there’s a ton of forex reports in relation to these two currencies and you’re much less likely to miss some important announcement.
With all these factors coming into play, the recommendation for newbies is to keep to one pair and make it a largest, EUR/USD. That is if you are trading for yourself. If you are employing a robot, it could be set up for other currency exchange currencies and you should go with the suggested pairs.
