In this blog post I want to discuss the best currency pairs to trade when trading the forex markets, because there are unquestionably some forex pairs that are better than others. Some traders like to stick to just one or two, whilst others may use as many as four or five different pairs. However when you consider that there are over 120 currency pairs to choose from, it is important to note that you can automatically forget about most of these.
The fact is that a lot of these will be more exotic ones involving the currencies of many of the smaller countries. So as a result you will generally find that these pairs will have very high spreads, and will therefore be almost impossible to make any money from. Therefore you can eliminate a large number of these currency pairs right from the start.
This should leave you with some of the most actively traded pairs, and indeed the best currency pairs that you can use when trading forex.
Everyone will have their own opinion of course, but at the very least you should only trade what’s known as the major currency pairs. These are the GBP/USD, EUR/USD, EUR/GBP, AUD/USD, USD/CAD, USD/CHF and USD/JPY, and they are generally the most actively traded and have the tightest spreads, which means they are the easiest to trade in theory.
From this list, you can then test out each one to see how profitable they are based on your favourite trading strategy. You will find that despite the fact that they all conform very well to technical analysis, they all have their own unique behaviour. Therefore some pairs will work well with certain strategies, whilst others may not be as profitable.
It all comes down to testing at the end of the day. My own system uses the 4 hour and daily charts, and I find that the GBP/USD, EUR/USD, USD/JPY pairs give me the best results, but other forex traders will have their own favourite pairs that they like to trade.
You may find that the time of the day that you are available to trade may have an influence. For example if you are only available to trade between the hours of 17.00 and 22.00 (UK time), there is little point in trading the British or European pairs because their respective markets will already have closed for the day. Therefore the currencies will hardly move at all during this time.
So the point is that there aren’t really any best currency pairs to trade when trading forex because it is dependant on several factors. However what I would say is that you should focus specifically on the seven major pairs that I mentioned earlier and go from there. You can be sure that these will give you the best results, if only because they have the tightest spreads and are the most actively traded.