Forex Pairs: Trading The Best Currency
Forex pairs are always involved in currency trading. The pair is the two currencies involved in your trade. For example if you are exchanging US dollars for Swiss francs, the currency pair is USD/CHF.
Trading is limited in most cases to the currencies of the larger financial powers, though theoretically you could trade any two currencies of the world. This does not mean necessarily the most powerful politically or the biggest countries. Because of the global importance of the Swiss banks, Switzerland for example a small country, is a major player in the financial markets.
There are 6 major forex pairs which between them account for 90% of the funds traded on the forex markets. These are:
- the euro and US dollar: EUR/USD
- the British pound and US dollar, nicknamed Cable because it used to be synchronized on both sides of the Atlantic by a cable running under the ocean: GBP/USD
- USD/JPY: the US dollar and Japanese yen.
- USD/CHF: the US dollar and Swiss franc.
- AUD/USD: the Australian dollar and US dollar.
- USD/CAD: the US dollar and Canadian dollar.
It is best to stick with the major forex pairs in the beginning. But traders do get involved in other combinations of these major currencies that include other countries such as the New Zealand dollar.
The most significant single currency is the US dollar and according to a 2007 study, is involved in 85% of trades. The euro is second at 37%. Next come the yen, pound, Swiss franc, AUD and CAD in that order. These add up to more than 100% because there are always two currencies in every trade. In case you were wondering.
What Is The Best Currency Pair For A Beginner?
Because there is a lot of information about the EUR/USD pair and the high liquidity results in a smaller spread, most experts advise starting out in forex with this pair so your costs will be lower.
Some of the other currencies have particular characteristics which make most newbies avoid them unless they have special knowledge. For example the value of the Canadian dollar is strongly influenced by the price of oil because Canada is an oil exporter. The Japanese yen can also be affected by the price of oil in the opposite direction because Japan is a large consumer and importer of oil.
When you are starting out you will not want to get involved in a lot of different currencies. For the first few months at least, probably the best thing to do is to take the EUR/USD market and stay with that. The second choice of the major forex pairs would be the GBP/USD for most new traders.
Forex Pairs: What Is The Best Currency Pair To Trade?
Currency trading always involves forex pairs. The two currencies involved in your trade is the pair. If you are trading US dollars for Swiss francs, for example, the currency pair is USD/CHF.
Theoretically you could trade any two currencies of the world, but in practice most foreign exchange trading is limited to the currencies of the larger financial powers. This does not necessarily mean the biggest or most politically powerful countries. Switzerland for example is only a small country but is a major player in the financial markets because of the global importance of the Swiss banks.
Between them, there are 6 major forex pairs which account for 90% of the funds traded on the forex markets. These are:
- USD/EUR: the US dollar and the euro
- USD/GPD: the US dollar and the British pound, because it used to be synchronized on both sides of the Atlantic by a cable running under the ocean is nicknamed Cable.
- JPY/USD: the Japanese yen and the US dollar.
- USD/CHF: the US dollar and Swiss franc.
the Australian dollar and US dollar: AUD/USD
the US dollar and Canadian dollar: USD/CAD
Some traders do get involved in other combinations of these major currencies or pairs that include other currencies such as the New Zealand dollar. But in the beginning it is best to stick with the majors.
The US dollar is the most significant single currency and is involved in 85% of trades according to a 2007 study. The euro is second at 37%. Next come the yen, pound, Swiss franc, AUD and CAD in that order. If you are wondering why these add up to more than 100%, it is because there are always two currencies in every trade.
What Is The Best Currency Pair For A Beginner?
If you are just starting out in forex, most experts advise beginning with the EUR/USD pair. This is because there is a lot of information about these currencies and the high liquidity results in a smaller spread, so your costs will be lower.
Some of the other currencies have particular characteristics which make most newbies avoid them unless they have special knowledge. For example the value of the Canadian dollar is strongly influenced by the price of oil because Canada is an oil exporter. The Japanese yen can also be affected by the price of oil in the opposite direction because Japan is a large consumer and importer of oil.
When you are starting out you will not want to get involved in a lot of different currencies. For the first few months at least, probably the best thing to do is to take the EUR/USD market and stay with that. The second choice of the major forex pairs would be the GBP/USD for most new traders.