Do you want to learn about forex trading?
The first way to go about it is by starting with understanding the currency pairs.
The basics are simple in that the forex market works in a way that you can’t only trade a dollar weakness or its strength.
That won’t be enough; you have to pin it with other currencies to realize its value.
Therefore, the value of the currencies is only calculated when the currencies are traded in pairs. The major currencies drive the global forex market and are arguably the heavily traded currencies.
The Main Currency Pairs in Forex Trading
The most significant currency pairs in forex trading consist of five currencies; US dollar, Euro, Japanese Yen, Swiss Franc, British pound.
Also, it involves three less popular commodity pairs. So what are the leading pairs in the forex market?
- EUR/USD (euro/dollar) – euro
- USD/JPY (US dollar/Japanese Yen) – gopher
- GBP/USD (British pound/dollar) – cable
- USD/CHF (US dollar/Swiss franc) – swissie
Also, there’re other three less popular commodity pairs, and they include;
- AUD/USD (Australian dollar/US dollar) – “Aussie.”
- USD/CAD (US dollar/ Canadian dollar) – “loonie.”
- NZD/USD (New Zealand dollar/ US dollar) – “kiwi.”
While the above are the major currency pairs, some traders go the extra mile to include some other currency pairings that do not feature the US dollar known as “cross currencies.”
Any currency participating in the free market can be traded in the forex.
Therefore, Polish Zlots, Czech crowns, and Romanian Lei can be traded as well. However, it not recommended that you go ahead and trade them.
These major currency pairs account for almost 95% of the trades in the forex market and have the least spreads.
Besides, the commissions are the smallest, and they’re widely traded by huge institutional as well as retail traders.
Is there a pair that’s more superior?
All the pairs are major in forex trading; however, the EUR/USD is more famous, and it’s the most traded pair with most forums dedicated to it.
Notably, each pair is unique in how it moves and when it moves, volatility as well as support and resistance areas.
Therefore, to master a currency pair requires a lot of time, but once it has been learned, the results are worth the input time.
For novice traders, it’s strongly recommended that they pick one or two pairs and then learn their swings.
Why Traders Trade Main Pairs
They say volume attracts more volume. With more size, the spreads between bid and ask price narrows, meaning majors have smaller spreads than the exotic pairs.
With the high volume, the significant pairs attract most traders keeping the volume high.
The advantage with high volume for traders is that they can enter as well as exit the market seamlessly with huge position sizes.
Moreover, high volume means more folks are willing to buy or sell at some point meaning there’s less chance for slippage or merely smaller slippage if it does occur.
What Determines the Prices of Major Pairs?
The main pairs are free-floating currencies, and hence their prices are determined by their supply and demand.
Furthermore, the central bank can have a hand in controlling the price, but only when preventing the price from falling or raising that it could even cause economic harm.
The major currencies are usually affected by main fundamentals such as interest rates, politics, economic data, and volatility.
Nevertheless, it’s always wise to choose liquid currency pairs, appropriate leverage, and the perfect trading time frame to ensure you come out of the forex market with profits.
TIPS FOR TRADING CURRENCY PAIRS
Forex traders utilize discipline and consistency in their trading. Here are some expert tips to kickstart your forex trading:
- If you’re new to forex trading, choose liquid currency pairs like the EUR/USD or the USD/JPY. Then analyze the fundamentals and the technicals until you are familiar with what moves the currency pairs.
- Determining the appropriate leverage is of crucial importance when trading currencies. Lots of beginner forex traders wipe out their accounts because they use excess leverage.
- A forex trading strategy can help to ensure traders are consistent and disciplined. This can lead to profitability and deter loss, causing behavior.
- Choose the best trading time frame to suit your needs. You can choose from swing-trading, day-trading, or scalping depending on which one appeals to you most.
- Use our free trading forecasts on significant currencies to stay ahead of the forex market. And for daily updates on major forex pairs, view our currency market news and technical analysis articles.