How to Find the Best Currency Pair to Trade

doug-the-day-traderWhether traders are speculating in trends, breakouts, or ranges, currency pair speculation can be of significant value. Whilst major pairings can offer considerable volatility, often they are not the best markets for traders to voice their opinions. While there are a few major pairings which dominate the volume from many traders in the Forex market, the key to success is finding the best possible pairing in order to execute your strategy. Although many new traders prefer to play it safe by opting for the major currency pairs, it’s good to note that these are not always the best for success.

Separating Strength from Weakness

Pair selection is one of the most significant key tools that a Forex trader owns. Strong-weak analysis is a process which traders can look at to accordingly grade the strength and/or weakness of a certain currency against each of the other individual currencies. When using account Forex trading, it’s important to be able to carefully analyse the strengths and weaknesses of the currency pairs that you choose to trade in order to ensure that you get the best return. Using this method of analysis allows traders to focus on the optimal pairings for their goals, and can be done through the use of a spreadsheet or tools provided by many trading platforms.

Latest Market News

Keeping up to date with the latest market news gives you a better idea of which currencies are currently the best to trade. Once you have figured out which are the strongest currency pairs, it’s a good idea to listen to or read the latest global news to discover any unusual market updates, for example a stock market drop in a certain country. Staying up to date with the news will give you the most information on the latest market sentiment and risk situation of the best currency pairs to trade on the Forex market. This will give you a better understanding of which currencies are facing huge volatility risk, which the majority of traders will avoid.

Don’t Follow the Crowd

Studies show that many market participants are often wrong with their positions. Since many brokers and trading-based social media sites keep their visitors updated regularly with the latest market sentiments in most trading instruments including Forex, this can give you a good idea of what the majority is doing. Rather than following the crowd, the idea is to go against the majority of the crowd – for example if a large percentage of Forex traders are in a long position on GBP/USD, you should instead think about shorting this position and vice versa. Lastly, never choose a currency pair simply because everybody else is doing so – when trading Forex, it’s crucial to always trust your gut feeling and never force yourself to enter the market if you have a bad feeling about it.

Finding the best currency pairs at any given time requires some research and analysis on your part in order to generate success. Rather than going with the most popular currency pairs, taking some time to study the strengths and weaknesses can significantly benefit you.

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