What are the best forex pairs to trade?
The forex market is one of the most liquid markets in the world, with over a staggering $5 trillion of different currency transactions taking place each day. But which are some of the most popular forex pairs amongst traders, and why? If you’re a beginner to forex pairs, this article will help you understand the following concepts:
No Slippage
Trades are executed at the rate you see, on easyMarkets platforms ensuring you will never be surprised by a spread change during volatility.
Tight Fixed Spreads
As part of our Price Transparency Promise, our spreads never change during trading hours, so you know your costs upfront.
Free Guaranteed Stop Loss
Protect yourself and your open trades against runaway losses. A standard feature on easyMarkets Web & App Platforms.
Negative Balance Protection
Another condition offered as a standard feature on easyMarkets accounts, this ensures you are protected when you trade.
No Slippage
No Slippage
Trades are executed at the rate you see, on easyMarkets platforms ensuring you will never be surprised by a spread change during volatility.
Tight Fixed Spreads
Tight Fixed Spreads
As part of our Price Transparency Promise, our spreads never change during trading hours, so you know your costs upfront.
Free Guaranteed Stop Loss
Free Guaranteed Stop Loss
Protect yourself and your open trades against runaway losses. A standard feature on easyMarkets Web & App Platforms.
Negative Balance Protection
Negative Balance Protection
Another condition offered as a standard feature on easyMarkets accounts, this ensures you are protected when you trade.
What are Forex Pairs?
A forex pair quotes the price of one currency against another. Within a pair, there are two parts - the base currency and the quote currency. The base is the first currency in a pair, and it’s the currency the trader believes will rise or fall against the quote currency. For example, if you were to sell Japanese yen versus US dollar (JPY/USD), it means that you anticipate that the price of the Japanese yen will fall against the USD dollar.
Forex pairs are categorized into three main types, these include:
Major Pairs
Major pairs are the most heavily traded currencies. They include currencies from the world’s largest and most stable economies - some popular pairs include EUR/USD, GBP/USD and USD/JPY. Major pairs are popular among beginner and expert traders due to the high liquidity and low spreads.
Minor Pairs
Minor pairs, also known as cross-currency pairs, don’t contain the US dollar, but still include widely traded currencies like the euro, British pound, and Japanese yen. Minor pairs are generally less popular among traders as they are less liquid and often have higher spreads.
Exotic Pairs
Exotic pairs match a major currency like the US dollar or euro with the currency of a developing economy like Brazil or Turkey. These pairs are not as frequently traded as majors or minors, so they tend to have higher spreads.
Factors That Affect the Price of Forex Pairs
Before trading forex pairs, it’s important to have an understanding of the factors that drive markets. Some of these include:
Monetary Policy
Decisions made by central banks can have a major impact on currencies. For instance, a change in a country’s interest rate can impact the appreciation or depreciation of a currency pair. When a central bank raises interest rates, it can increase the value of a country’s currency, whereas lower interest rates can decrease the value of a country’s currency.
Economic Stability
The value of a currency is largely tied to its economic stability. Stable economies like the US or Japan tend to attract a large amount of foreign investment, which helps increase the value of their currencies. Whereas less stable economies receive less investment, which leads to a weaker currency.
Politics
Political events can have a considerable bearing on the strength of currencies – Great Britain’s exit from the EU is an excellent example of this. This withdrawal created a lot of uncertainty surrounding the UK’s future economic prospects, which resulted in traders losing confidence in the pound. As a result, its value dropped significantly against other major currency pairs.
The Most Popular Forex Pairs
The most popular forex pairs among traders are the majors, as they offer high liquidity and lower spreads. Below is a list of four of the most traded currency pairs:
EUR/USD
This currency pair is known as the “The Fiber”, and it’s the most traded pair in the world. Over 24% of daily forex market transactions derive from this currency pair, which is not surprising given these are the currencies of the world’s two largest economies. As this pair is highly traded, spreads are low and less volatile, making it a potentially suitable option for beginner traders.
USD/JPY
Known as “The Gopher”, this currency pair is one of the most popular pairs amongst traders. Like EUR/USD, it’s highly liquid and has low spreads. This means that traders can buy and sell the currency pair without experiencing significant fluctuations in the exchange rate.
GBP/USD
The British Pound/United States dollar currency pair, also known as “The Cable”, is widely traded. This currency pair is more volatile than “The Fiber” or “The Gopher”, due to the frequent price fluctuations it experiences. This volatility is preferred amongst certain traders as it creates the opportunity to create larger returns. However, it can result in equally large losses as well.
USD/CHF
The US dollar and Swiss Franc currency pair, also known as trading the “Swissie”, may initially sound a surprise inclusion as Switzerland isn’t a major global economy. However, this currency pair is popular due to the strong reputation Switzerland holds as a safe haven. With a stable financial system and government, traders turn to the franc in times of economic uncertainty. Although it is less liquid than the other major pairs listed, it’s still a popular choice among traders.
How to Trade Forex Pairs with easyMarkets
Research and analyze which forex pair you would like to trade.
Login to your account, and then select your chosen forex pair.
Decide whether to buy or sell.
After you open a position, monitor your trade closely to assess the performance.
If your trade prediction is correct, you’ll generate a return. If it’s incorrect, you’ll generate a loss.
Forex Pairs FAQs
You can trade nearly 100 currency pairs with easyMarkets, including major, minor and exotic pairs. See the full list of forex pairs easyMarkets offers here.
There are certain currency pairs which can be less volatile than others. For instance, currency pairs such as EUR/USD, GBP/USD and USD/JPY are generally considered to be some of the least volatile pairs since they trade with large amounts of liquidity. If you have a lower-risk appetite, then it may be more suitable to trade major currency pairs like the ones listed above, rather than minor or exotic currency pairs that tend to be more volatile and unpredictable.
When you trade forex, returns aren’t guaranteed, and there’s a chance you may lose some or all your invested capital. However, there are steps you can take to mitigate your risk and reduce the likelihood of loses. Some of these steps include:
- Take a trading education course like easyMarkets Academy to bolster your knowledge.
- Use an established and regulated broker.
- Use easyMarkets unique risk management tools like dealCancellation, Freeze Rate and guaranteed stop-loss.
- Create a trading plan to establish clear rules around your forex trading decisions.
Various factors can impact the price movements of forex pairs, including the strength of a country’s economy, geopolitical events, and monetary policy.
To start trading with easyMarkets, you’ll need to make a minimum deposit of $25.
The forex markets are open 24 hours a day, 5 days a week.
There are 7 forex pairs which make up 85% of forex market transactions, these include:
- EUR/USD
- USD/JPY
- GBP/USD
- AUD/USD
- USD/CHF
- USD/CAD
