How to pick the best currency pairs to trade in forex

June 21, 2018   /   by Marco  / Categories :  Business
How to pick the best currency pairs to trade in forex

When it comes to forex trading, there are numerous currency pairs that can be traded. Choosing the right currency pair determined whether you make money or lose money. Fortunately, there are only a few major currencies to choose from in online forex trading platforms such as junomarkets com. Most forex traders lose money because they are not well aware of the best currencies to pair.

Here is how to ensure you pair the best currencies when trading forex.

Open charts of several currency pairs

The best way to ensure you pair your currencies wisely is by analyzing charts of different pairs that have been traded recently. You need to find the pairs that are making money and those that are under pressure. Also, take note of any currencies that are behaving the same when paired with most of the other currencies.

With this knowledge, you will be able to find the best currencies to pair and trade.

Be up to date with global financial news

Now that you have your favorite potential pairs, you need to update yourself with the financial news. You should be listening for any unusual market updates. The news makes it possible for you to discover any new market sentiments as well as the risk-off/risk-on situations of your currency pairs.

With this information, you are better placed to decide which currencies are too volatile to trade and thus adjust your pairs to cover this need. While it is possible to make money from a volatile currency, you can also lose money from taking a chance on a volatile currency.

Pair strong currencies against weak currencies

The best pairs to trade in forex are those comprising of the most trending currencies. The strongest pair is one that comprises a strong base currency against a weak quote currency. For instance,  EUR/USD currency pair can move strongly upwards if the euro is gaining as the dollar is dropping.  AUD/JPY currency pair can be a loss if the AUD is losing while the JPY is gaining.

It can also sometimes be profitable when you pair a volatile currency against one that is not making too many changes. Even so, this is a huge risk to take.

Conducting technical analysis

Before you settle for your preferred currency pairs, it is important for you to conduct a technical analysis of the pairs you have chosen. Studying market charts to technically analyze each currency will ensure that you only pair currencies that are best suited to make you profits.

Look at your portfolio to see whether your open positions include your paired currencies. Ensure you diversify your portfolio as much as you can. You can do this by avoiding to pair the same currencies twice. For instance, if one of your trade is EUR/USD, it is advisable to avoid creating another pair that includes the euro.

How to pick the best currency pairs to trade in forex2

Weigh the pip value against your risk

It is natural for some currency pairs to have higher pip value than others. A high pip gives you more profit in winning forex trades and can multiply your losses in losing trades. You need to calculate your loss tolerance to be able to set a stop and limit order properly. This allows you to only invest what you can afford to lose and thus boost your confidence while trading.

Trust your gut while trading

Based on research, some traders make profits by trading against the masses. If a majority of traders are trading a long GBP/USD, it may be wise for you to short the pair and vice versa. Trading against most traders is usually a good idea for short-term trading positions.

It is also advisable doe you to trust your gut feeling when trading. If you do not feel safe while getting into a current market, it is a good idea not to trade. Trading when you are not too sure makes you make decisions that may not benefit your trade.

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