Currency Forex Market : Currency Pairs

It is important for any forex trader to know the best pairs to trade in the currency forex market, so which are the best currency pairs? The answer depends on two factors.

1. Liquidity

For a beginner learning to trade on the live markets or with a demo account, the best forex currencies to get involved with are the ones that have highest liquidity. That means the pairs on which most money is traded each day.

There are several reasons for this. One is that the high liquidity means that it is almost certain to get a trade matched. So if you place a stop, for example, it is more likely to be triggered at the exact point that you set, without any slippage. Of course, this depends on your broker too.

The second big reason for choosing the most active currency pairs for your trading is that usually they will have a lower spread. This is the broker’s profit. A lot of activity in the market naturally creates a narrow spread. At the same time, competition for trades in the most popular pairs is intense between the brokers, so you can take advantage of that by choosing those pairs.

So which are the most heavily traded pairs in the currency forex market? Of course they all involve the US dollar, which is the biggest traded currency in this great forex world. Second is the euro, so the top forex currency pair is EUR/USD. After that comes the Japanese Yen in the pair USD/JPY, and then GBP/USD, the British pound against the Dollar. Interestingly the GBP/USD is known as cable because in the early days of fx trading telegrams or cables were used to pass instructions to your trading broker.

2. Systems

There is a second very important factor to take into account when considering which currency pair to trade, and that is the system that you are using. Many systems are designed for particular pairs and will not necessarily work for other pairs. This might seem strange until you realize that the economic factors affecting the world’s nations vary from country to country. For example, some countries are heavily dependent upon one particular export or trade. This means that their currency will behave differently from others because it is linked to the price of one commodity or the conditions required for something like tourism, manufacturing or agriculture will have to be favorable for the currency to perform well.

You can of course invest in an automated forex trading system or robot, and these are usually designed to work with specific currency pairs. For example FAP Turbo works with two cross pairs, not involving the US dollar. You could not set that robot to make money with any pair that you chose. In fact the robot is no different from any other system that you might find in the market except that it is automated. If you choose a forex robot the manual will explain which are the best currency pairs to use that robot in the currency forex market and how to set the parameters for each of these.