Which is the easiest currency pair to trade?
EUR/USD is not only the most stable but also the easiest currency pair to trade. It is therefore considered the best choice not only among beginners but also for professional traders. This is one of the most traded currency pairs due to tight spreads and high liquidity.
But this pair also has a high level of volatility and is difficult to predict. All major banks, brokers and other financial institutions use the pair as the main trading instrument, making it even more unpredictable.
Although EUR/USD is one of the most widely traded instruments, you can choose from other popular currency pairs that also have tight spreads and high liquidity.
When you start trading Forex, it is impossible to follow all currency pairs and news related to each of these correctly. Each currency pair reacts according to its behavior.
For beginners, it is best to start by focusing on a shorter list of currency pairs to watch. You should know how to choose them. In this article, you will find out which are the best pairs to shop for when you are just starting out.
EUR/USD, the Fiber
It is the currency pair with the highest liquidity with moderate volatility. It consists of the two main currencies in circulation in the world, the euro and the US dollar, which are also supported by a good economic system.
This is why Fiber is traded not only by retailers but also by large banks and financial institutions. It is usually the pair with the lowest spread.
EUR/USD is a good pair to trade for beginners due to its steady nature. If you look at its daily chart, you can see that the pair usually trades within a range. It is one of the best Forex pairs to apply a simple trading strategy: buy low, sell high.
GBP/USD, the Cable
The GBP/USD currency pair is more volatile than the previous pair. This means that it offers good opportunities for profit generation but also carries a higher level of risk.
The Cable can wildly react to news coming from the Brexit negotiations between Europe and the UK. London is a major financial center. Therefore, The Cable is one of the most popular Forex pairs, its trading volume is high and it also has excellent liquidity conditions.
GBP/USD is positively correlated with EUR/USD. This means that the two pairs usually share the same price action. GBP/USD is suitable for beginners as it is predictable in terms of volatility. Every day around 8am London time, you can see this couple somehow wake up from their sleep and start trending. This phenomenon is known as the ‘London breakout’.
USD/JPY, the Gopher
The US dollar and Japanese yen currency pair, also known as Gopher, is characterized by stable trends over long periods of time. It also has a large trading volume in all sessions. This currency pair is always active and never really sleeps, unlike GBP/USD.
The United States and Japan are in an economic war, each trying to keep a more competitive price than the other to avoid inflation and make their products more attractive to buyers around the world.
The yen is mostly driven by fundamentals than technicals and it has a low interest rate, that’s why USD/JPY is one of the favorite pairs for investors.
Beginners are advised to swing trade when trading USD/JPY. This means opening long term positions to take advantage of Gofern’s long term trends, whether bullish or bearish.
AUD/USD, the Aussie
Among the most interesting currency pairs to trade for beginners, AUD/USD has an important place. In fact, traders can easily analyze this pair by studying it through various indicators.
The Australian dollar against the US dollar is one of the strongest pairs in long-term trends. It has ample liquidity and good short-term prospects. Keep in mind that the Australian dollar is highly correlated with gold, silver and commodities in general, as the Australian economy is highly dependent on commodities.
Beginners can easily tame the Aussie by studying its long and stable trends by using indicators or simply by looking at its price action. A trend trading strategy is best suited for AUD/USD.
USD/CHF, the Swissy
The USD/CHF currency pair is less active than the four major pairs above. It is a good barometer of fear: it recovers when the general economic climate is optimistic and plunges in periods of recession.
One of the characteristics of the USD/CHF currency pair is undoubtedly its strong dependence on the economic situation. This can be explained by the fact that the Swiss franc tends to play its role as a safe haven when other economic values lose points.
This situation has long been verified historically and confirms the international importance of the Swiss franc. The currency has seen a strong appreciation during the recent major economic crises. Swissy is a trendy pair, which means that its movements, whether bullish or bearish, are both strong and long. It is therefore ideal for beginners to apply a swing trading method and take advantage of its wide swings in price action.
EUR/GBP, the Chunnel
The euro against sterling is excellent in terms of liquidity and spread. It is a popular pair in the intraday market. The EUR/GBP currency pair has low volatility and is recognized as a trend cross. This means that long bullish or bearish trends can usually be observed in this currency cross with few intermediate fluctuations.
The Chunnel is less exposed to random movements thanks to its low volatility. Therefore, beginners should trade EUR/GBP using intraday trading methods. You will be able to benefit from its slow but consistent trends.
We have highlighted the most interesting Forex pairs for beginners. There are other popular pairs such as USD/CAD (Loonie) and GBP/JPY (Dragon); however, these pairs are more volatile and difficult to predict. As a beginner, you should stick to the one listed above.
What about raw materials?
Most beginners mix up commodities for Forex pairs. This is because they share the same notation – / USD. The most popular commodities among traders are gold (XAU/USD) and oil (XTI/USD). Their symbols may change depending on the broker.
Gold, XAU/USD
Gold is undoubtedly a safe and profitable investment. Indeed, precious metals are not subject to fluctuations that constantly hit the currencies. XAU/USD is a safe haven that survives financial crises such as devaluation or inflation.
Security is not the only strength of gold. Its ability to generate huge profits attracts investors. Trading this metal allows speculators to take advantage of the leverage to further increase their profits.
Long-term investors are also interested in gold. It is considered an almost risk-free investment. In fact, its rarity and the increase in world population show us how gold is important.
Forex beginners can easily take advantage of XAU/USD, especially during financial uncertainty. The value of gold increased significantly after the global financial crisis of 2007-2008.
Oil, the black gold
Oil has a prominent place in online trading. Many investors speculate on the price of black gold. Although the price can move significantly due to geopolitical tensions, oil remains a profitable investment. Like gold, oil is an increasingly rare asset, which means it can increase in value.
In addition, high demand is also an important factor. Despite the emergence of new energies, oil is still the most efficient of all. The oil market is now open to all traders. Anyone can invest in oil via CFDs (Contracts For Difference).
All you need is a basic knowledge of technical and fundamental analysis. Trading platforms also offer new traders all the necessary tools to trade. It is no longer necessary to be a specialist to speculate on oil. XTI/USD is suitable for beginners looking for an intermediate investment.
Cryptocurrencies or digital currencies
Cryptocurrencies are a new type of currency that has gained huge popularity in recent years. They are over-hyped on the internet. Cryptocurrencies are virtual currencies that use digital encryption for their operations. Their transactions are carried out without intermediaries. These digital coins use cryptography to create a secure environment with greater privacy and do not respond to the control of any country or institution, as they are decentralized.
These virtual currencies began to emerge in 2009 when Bitcoin was created and proposed as an alternative currency not controlled by banks. So far, a variety of cryptocurrencies have emerged, creating a new market for digital currencies where more and more people are investing and using it for payment.
The main difference between these new currencies and conventional money is that cryptocurrencies are only traded online, and we can only have it in digital form. There are some advantages and disadvantages of cryptocurrencies over traditional money that we know of. Some of the benefits have already made many people use these cryptocurrencies to buy goods and services.
But the crypto market itself is quite new and volatile. Cryptocurrencies are emotional investments and can make surprising price movements in a matter of hours.
Bitcoin, the most popular of the cryptocurrencies, increased by more than 2,000% in 2017. But Bitcoin also lost more than 60 percent in 2018. This is far too volatile for a new Forex trader. If you invested $10,000 in Bitcoin in January 2018, your investment would turn into less than $4,000 in October 2018. Beginners should avoid the cryptocurrency market due to its volatile nature.
Conclusion
You can compare currency trading to surfing. Let’s imagine that you are learning how to surf. There are beaches with waves that barely reach two meters and others whose waves easily exceed six meters or more.
During the learning process, it would be absolutely crazy to start surfing waves that are several meters high, as you would surely drown. It is safer to start with small waves that represent a lower risk. The same idea applies to Forex. As a beginner, you should stick to the Forex pairs that are less volatile to protect your trading account.
Source: Vikingen.se
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