How to Select the best Forex Currency Pair?

September 19, 2009

Do you know what is a currency pair? The currency pair got of two foreign exchange currencies involved in a trade. Some of the popular currency pairs are EUR/USD and USD/CAD. Now what is the best pair for currency trading? There are mainly 2 factors that you have to take into account when selecting the best foreign exchange pairs for forex trading. These factors are activity and the forex trading systems. Now let’s see the activity part.

Which are the Most Active Currency Pairs?
If you are new at forex the best ways to start foreign exchange trading is by picking up the most active currency pairs. Many experts will advocate you to do so due to a number of reasons. The 1st factor is that heavily traded currency pairs have high liquidity and this means that your stop losses will more often be met without slippage. Also, in case of foreign exchange pairs which are really active in the market, the costs are likely to be lower. While enormous number of traders are trading in the forex trading market it creates a tighter spread, and there is also big war between foreign exchange brokers which will help to keep the fees lower.
So does this mean we only require to look into the most active foreign exchange market and pick the foreign exchange? Not really. If you are new to currency trading you may be surprised to learn that the most voleme forex floor is London, UK and not New York. But the most traded currency globally is of course US dollar. Now one might conclude that US Dollar, GBP (British Pound) pair is the most traded foreign exchange in the forex market. This is not true. Actually EUR/USD currency pair is the most traded currency pair. The next most active forex pair is USD/JPY and the 3rd is GBP/USD pair.

Best Currency Pairs for Your trading System
The key factor in selecting the currency pair is of course the activity level and your understanding about the financial conditions of a particular currency. Your forex trading system also could be a factor in selecting the foreign exchange pair. You might have the best Fx trading system, but if you pick the wrong currency pair you might end up with poor results.
For example if your trading system involves the use of automated forex robot, you will most likely find that the particular currency trading EA is set to work with a small number of forex currency pairs and that the most active currency pair may always gives you the best results. Example, you may know that FAP Turbo which the best selling forex robot currently in the market is set to trade Euro British pound and Euro Swiss Frabc currency pairs. In case of FAP turbo most users experienced that they are able to achieve better results with EUR/CHF pair though EUR/GBP more active pair in this situation. Though you can trade different currency pairs with a foex EA, a specific forex software is always tend to give better profits with its currency pair.
Hence in cases like this one should choose a forex currency pair which is suitable to your trading system even if the currency pair is not the best. There is a new forex software called Ivybot which provides you 4 different trading robot in which each one is created to perform well for a specific currency pair. You can checkout the Ivybot review here.