These currency pairs account for over 60% of the total forex trading volume according to the 2022 BIS triennial report. EUR/USD is the most traded currency pair, accounting for approximately 23% of the total trading volume. Day traders and scalpers, who aim to profit from short-term price movements, may find volatile pairs particularly appealing due to the frequent opportunities for quick gains. However, it’s essential for traders to have a thorough understanding of the market and employ robust risk management strategies when trading volatile pairs to mitigate potential losses. Our list of the most actively traded currency pairs starts with the EUR/USD, which has the greatest trading volume.
How Can I Enhance Profitability in Trading Forex Currency Pairs?
The NZD/USD currency pair consists of the New Zealand dollar quoted in terms of the U.S. dollar. This pair is influenced by factors such as commodity prices (especially dairy products), interest rates set by the Reserve Bank of New Zealand and overall risk sentiment in the forex market. Although dealing spreads tend to be wider and liquidity lower, the NZD/USD pair demonstrates decent volatility that provides forex traders with acceptable opportunities for profit.
Minors
EURUSD, USDJPY, GBPUSD, USDCHF, USDCAD, AUDUSD, and NZDUSD are all majors. But seriously, I’ve always said that the process of becoming a great Forex trader is more important than the destination. And if you want to become consistently profitable, it’s essential that you understand everything there is to know about the currency pairs you’re trading. This is one reason why I’m not an advocate of mastering one or two currency pairs at a time.
- However, the country’s significant agricultural presence is what attracts the “commodity currency” label.
- This pair has historically been sensitive to political sentiment between the United States and the Far East.
- So even though the Aussie was riding the gold wave at the time (which wasn’t very impressive as you’ll see below), the US dollar was strengthening at a faster pace.
- As a general rule of thumb, the more liquid a market is, the more you can rely on the technicals.
- Remember that a currency’s value depends on the currency sitting next to it.
- Although you will likely not stick to one pair, it is still worth noting some features of currency pairs.
Minor Pairs
The forex market gives all traders, including retail investors, the potential to make money trading currency pairs. Understanding the fundamentals that drive currency pair pricing is essential to your success. For those drawn to the foreign exchange market, selecting the best currency pairs to trade can be a tough task but the majors will win out in many cases.
A currency pair’s spread is another factor when considering it for scalping. When you initially begin swing trading forex, it is critical to keep an eye on several currency pairs in order to find the clearest opportunities. Swing trading works best when you keep your options open and use technical analysis to identify significant areas of support and resistance. It is important 8 best affiliate management software of 14 we reviewed + guide to remember that you are trading one currency against another. A currency pair is a quotation of the value of two currencies against each other. The first currency (the base currency) is quoted relative to the second currency (the quote currency).
When is the best time to trade forex pairs?
Using leverage cautiously is imperative, as higher leverage can amplify both profits and losses. Proper margin management is key, meaning traders should always have enough funds to cover potential margin calls and prevent liquidation. Fundamental analysis in currency trading involves assessing the economic, social, and political forces that may affect the value of a currency. Traders examine various indicators and events to predict currency movements.
Liquidity, volatility, spread, and the likelihood of slippage are the most significant factors. Chart readers love using tools such as moving averages, support and resistance levels, and chart patterns. For example, in the chart above, there is a bullish engulfing candlestick pattern that follows a downtrend, this suggests price may rally. Discover the difference between our account types and the range of benefits, including institution-grade execution.
Among the major currency pairs, GBP/USD and USD/CHF are known for their significant exchange rate movements, making them some of the most volatile and actively traded currency pairs in the forex market. The pair is the most traded globally as it represents two giant economies (the US being the biggest in the world). The movement of the pair is impacted by factors that impact the valuation of each currency.
The forex opening hours of each participating country’s market determine the forex trading hours. While many traders are drawn to the forex market for its 24-hour trading, others like it because of its long-term trends and reactions to major support and resistance levels. Position traders often keep positions open for weeks, months, or even years. Furthermore, position trading allows a trader to make a long-term investment as they are not required to “babysit” their trades. You should keep an eye on announcements from the European Central Bank (ECB) and the Bank of England (BoE), as these can affect the exchange rate.
This pair can also be affected by movements in the price of oil since Japan is a net oil importer. To choose a Forex currency pair, match it with your trading style and risk tolerance. Beginners favor major pairs like EUR/USD, while experienced traders may explore minor or exotic pairs. Consider market conditions and economic factors for informed decision-making.
The most volatile forex pairs are those that experience significant price fluctuations over short periods, offering traders potential opportunities for profit but also increased risk. It can experience significant volatility during major news releases and events impacting either economy. Additionally, in 2023, it boasted a high daily trading volume, accounting for approximately 11% of the forex market, nearly equal to that of the USD/JPY pair. Trading psychology refers to the emotional component of an investor’s decision-making process which may influence their behavior in the forex market. It plays a critical role as emotions can significantly impact the capability to trade currency pairs effectively. Discipline and emotional control are fundamental for traders when navigating the volatility of the forex market in 2024.
Therefore, Benzinga uses this measure to determine the best forex pairs to trade. They are 10 best oil and gas stocks for this year less commonly available, less liquid and tend to have higher spreads. However, they can still be profitable, particularly in times of high volatility caused by unique world events. Experienced traders can make money by watching the markets closely and trading a mix of major, minor and exotic pairs, but most new traders will start with the more common pairs. Aligning currency pair choices with individual trading objectives and risk tolerance levels is essential.
Prior to making any decisions, carefully assess your financial situation and determine whether you can afford the how to start a real estate brokerage potential risk of losing your money. As a matter of fact, it is considered the second most traded pair globally. As well as economic and geopolitical news impacting its own economy, the pair is also sensitive to news affecting the EUR/USD, given its close economic ties to both. Brexit has been a significant source of volatility and discussion, impacting the pair over the past few years or more. However, as with most pairs, interest rate differentials will be a significant driver of direction.
Justin has published over 100 finance articles from Forbes, Kiplinger to Finance Magnates. He has a Masters and Commerce degree and has an active role in the fintech community. The GBP/USD tends to have a negative correlation with the USD/CHF and a positive correlation with the EUR/USD. This is due to the positive correlation between the British pound sterling, the Swiss franc, and the euro. Asktraders is a free website that is supported by our advertising partners.