Top Traded Currency Pairs

What makes a currency pair a good one to use for trade purposes? Ideally, the top trade pairs have a small spread, meaning that there is a slight difference between the selling and buying price. Another factor to look at is strong and sharp signals. The best trading pair is the Euro against the US dollar. Some brokers charge less than one pip (the smallest price change that the exchange rate can make) when you buy EUR-USD, but the going rate is usually two pips. Trading the sterling against the US dollar is also a top option, but this pair is more volatile and with a greater spread. If your trade with the Euro and the dollar is going well, you do not need to change your pair of choice. In general, stable and liquid currencies are in most demand on the forex market. Both, political and economic factors are considered in terms of liquidity and stability. Again, the US dollar is actively traded in view of the strength and size of the US economy. Some not-so-ideal pairs include USD-JPY and USD-CAD. These pairs are dependent on the economies of Canada and Japan, where the situation is markedly different from that in the United States and Europe. Such trade will involve more risk.

On the other hand, CAD-JPY is a good combination because Canada produces oil, and Japan is one of the importers consuming it. When the oil price drops, CAD-JPY goes up and visa versa. It is not that simple, of course, as other factors come into play. Countries can modify their interest rates as a means of controlling the value of their national currencies. If they had no means of controlling them, countries like Japan and Canada would have a major trouble with perpetually fluctuating currency exchange rates.

What happens if you choose to trade the US dollar against the Canadian dollar, and the price of oil goes up? The USD-CAD will decrease because the value of the Canadian dollar will then increase. It is harder to predict what will happen to the USD-JPY if the price of oil goes up. The Japanese yen, as the currency of an oil consumer nation, will depreciate in this case. But the US is also an oil consumer; so, its currency goes down as well. What will happen? It is hard to say. There are always confounding variables to tackle.

The price of gold affects the trade of the Australian dollar against the US dollar. When the price of gold increases so does the value of these two currencies.

The Swiss franc is also a good currency to trace, especially for beginners in Forex trading. Other currencies you might want to look into are the New Zealand dollar and the Japanese yen.

One last piece of advice – never ever go for exotic currencies, about which there is no information offline or online. Then, why do you want to trade with the ariary, kip, kwacha, naira, kyat, togrog, or tenge? Keep in mind that you need a lot of insider information to choose a currency for forex trading. This type of information is available only to a select few.