Which currency pairs should be traded?
One of the biggest mistakes made by many forex traders is not understanding correctly about what forex currency pairs to trade and which direction to take.Unfortunately, too many traders focus on trying to perfect the entry method without realizing that if you make the right decision about what will happen today, the entry method you use will not make a big difference to your trading results.
Why Do Traders Not Consider the Selection of Currency Pair Carefully?
Most traders rush to start making a lot of money. According to what they hear the way to make money quickly is to use a smaller time frame. Of course this is theoretically very true. Traders know that some currency pairs have lower spreads such as EUR / USD and they should choose a currency pair that has a low spread to save costs.
Another common reason is the most active currency trading during working hours chosen by the trader. Another opinion says that each currency pair has their own personality and you have to have a lot of trading experience in order to know their personality. This knowledge can help your trading more successful.
Both of the above considerations are equally rational and correct in at least a few things. The problem is, they are too far from the most important consideration that should affect the currency pair you are trading.
The first factor that must be used in determining a currency pair
So how do you decide on a currency pair for trading? We just take the parable that the forex market is like a casino. To play in the casino, of course you need other players to risk money on the table so you can take advantage, right? They lose, you win and if you lose then they win.
So if applied from the parable above, which casino table would you choose as a playground? The most crowded table with the most players and the most money or table in a corner that is only filled by a few players? Obviously to get a lot of profit opportunities you have to choose the most crowded table.
In the forex market itself 70% of forex trading occurs between the US dollar, euro and Japanese yen. British pounds and Australian dollars only account for 10%.From here it is clear that the US dollar is the most dominant, so it makes sense to focus on every currency paired with the US dollar. You don’t need to open the trading platform and worry about 80 other currency pairs.
Minimize Your Choice
Now you know that it makes sense to pay attention to just a few currency pairs.This will make it easier for you to know which currency pair is suitable for trading today. This method is used to answer questions about which currencies are the most volatile? You need volatility because if the price does not move how you will make money.
You have to buy and sell currencies that have the biggest price difference to make a lot of profits. There are several ways to predict where market volatility will be and if you choose the right method you will get a good answer.
Which Forex Currency Pairs Should Be Chosen?
Another crucial factor is the trend or momentum. Major currencies such as the US dollar, euro and Japanese yen in recent years show a great probability of moving in the long-term trend. If you trade only during Asian hours then you might be better off entering Asian currencies such as Japanese yen and Australian dollar.
So the conclusions narrow your focus on the main forex currency pairs and currency trading that show the highest volatility. Then see where long-term trends move more. This will all give you the best chance of success in forex trading.