The Forex market is based on investing in currencies and waiting for their value to fluctuate. Forex traders trade in currency pairs and there are four major pairs. This article is here to help you choose the best trading currency pair.
Most traders choose a currency pair and stick to it. Since trading requires you to stay up to date with trends and economic indicators, it is easier to trade with only one pair. Even if you hear there are great investment opportunities with other pairs, you should stay away from these pairs until you are informed enough about them. Think of each currency pair as a separate market. A few traders use more than one pair, but you should not think about expanding your trading to more than one pair unless you have the time and motivation to double the amount of research you do on trends, political and economical events and market analysis.
There are four major currency pair: U.S. dollar and British pound, U.S. dollar and Euro, U.S. dollar and Swiss franc and U.S. dollar and Yen. The Canadian and the Australian dollar are becoming increasingly popular. You should select one of these major pairs and start doing research about it. Choosing the currency of the country in which you live makes it easier to deposit money in your account and to stay up to date with the situation in one of the countries. You can easily find useful information on each currency pair on specialized Forex sites, blogs and RSS feeds.
Learn to read quote currencies. A quote currency is a number that informs you about the relationship between two currencies. For instance, EUR/USD= 1.30 means that 1.30 USD is worth 1 Euro. These quotes keep changing, sometimes several times a day. You might have the impression that currencies retain their value for long periods of time, but this is a simplification. The value of a currency fluctuates from one minute to the other, and you need to take advantage of this fact to make money. Stay up to date with what is going on with your currency pair to know if you should get rid of your current placements or consolidate your position.
Expanding your trading activities to additional currency pairs could mean a bigger profit, but you should make sure you have the time to do more research about the Forex market. Once you get used to trading and can make your decisions quickly, you should be able to trade with more than one pair. Stay informed about political and economical events in these different countries and read more market analysis than before. Consider expanding your activity to less popular pairs if you want to trade on a different kind of market and try different strategies. Trading with popular pairs is a safer way to trade, since you will always have access to detailed information about trends.
Take the time to select a currency pair that corresponds to your level of expertise. You can try different pairs with a demo account and see for yourself which pair you are the most comfortable with.