How to Choose Currency Pairs in Forex - The Southern Maryland Chronicle
The forex market is all about growing your money through the buying and selling of currency pairs, so the key to getting high returns in this market lies in knowing how to choose the currency pairs that you’ll end up trading.
Sure, you can look at trends and important data about individual currencies, as well as currency pairs and how they interact with one another. And you can check out what the experts are doing. But what are some of the specific things you should look at when determining which pairs you’ll work with? Check out the tips below to learn more.
First, Know the Major and Minor Currency Pairs
You can categorize certain currency pairs as “major” and others as “minor .” Knowing which pairs fit into these categories can help you decide which ones you want to work with.
Major pairs are those that are paired with the U.S. dollar, and they are also the currencies that are most often traded all over the world. What’s nice about them, too, is they have high liquidity and there are always options to trade these. Plus, volatility is typically going to be low with these, and you can also usually get low spreads when you go with major currency pairs. Examples include the U.S. dollar and Japanese yen and the U.S. dollar and British pound.
On the other hand, the minor currency pairs will not have the U.S. dollar, and volatility tends to be higher. Examples include the British pound and Japanese yen or the Australian dollar and euro.
By developing an understanding of the pros and cons of major and minor currency pairs, you can begin to decide which route you want to take to get the greatest possible returns on your trades. And if you are using a platform like a MetaTrader 4 download for your PC , you can access helpful tools and news that can also make it easier to spot trends in these major and minor pairs.
Consider the Time of Day When You Prefer Trading
Let’s say that you prefer trading at a particular time of the day or night. After all, the forex market is open 24 hours a day, 5 days a week because you’re working with currencies from all over the world, and different markets are open at different hours of the day because of various time zones. By looking at the currencies that are the most active during the hours of the day or night when you’re buying and selling, you can narrow down your currency pair options.
In addition to looking at the currency pairs that are most active when you’re trading, you can also decide when you trade based on when your preferred currencies are active. If you want to pair the U.S. dollar with currencies like the Australian dollar or the New Zealand dollar, as a couple of examples, figure out the time during which you will be able to track them in real-time. That way, you can make adjustments to your trading strategy, as needed, based on the latest news.
See What Works for You!
Ultimately, it’s up to you to decide which currency pairs you want to trade. What works for one person might not work for someone else, so it might take some trial and error, but you’ll get the hang of things before you know it.