When you start trading in Forex, it is impossible to properly track all currency pairs and the news related to each one. Each currency pair reacts according to its behavior.
For beginners, it is best to start by focusing on a shortlist of Forex currency pairs to watch. You should know how to choose them. In this article, you will find out which are the best pairs to trade when you just get started.
EUR/USD, the Fiber
The most popular currency pair worldwide is the EUR/USD and it is also the one with the highest trading volume.
It is the one with the highest liquidity with moderate volatility. It refers to the two most important currencies in circulation in the world, the euro and the US dollar, which are also supported by a good economic system.
This is why the Fiber is traded not only by retail traders but also by large banks and financial institutions. It is usually the pair with the lowest spread.
The EUR/USD is a good pair to trade for beginners thanks to its steady nature. If you look at its daily chart, you can see that the pair usually trade in a range. It is one of the best Forex pairs to apply a range trading strategy: buy low, sell high.
GBP/USD, the Cable
The GBP/USD is more volatile than the previous pair. This implies that it offers good opportunities for profit generation, but also carries a higher level of risk.
The Cable can wildly react to news coming from the Brexit negotiations between Europe and the United Kingdom.
London is a huge financial center. Therefore, the Cable is one of the most popular Forex pairs, its trading volume is high and it also has excellent liquidity conditions.
The GBP/USD is positively correlated to the EUR/USD. This means that the two pairs usually share the same price action.
The GBP/USD is suitable for beginners as it is predictable in terms of volatility. Every day around 8 am London time, you can see this pair somehow waking up from its sleep and start trending. This phenomenon is known as the “London breakout”.
USD/JPY, the Gopher
The US dollar and Japanese yen currency pair, also known as the Gopher, is characterized by stable trends over long periods. It also has a large trading volume in all sessions. This currency pair is always active and never really sleeps, unlike the GBP/USD.
The United States and Japan are waging an economic war, each trying to keep a more competitive price than the other to avoid inflation and make their products more attractive to buyers around the world.
The Yen is mostly driven by fundamentals than technicals and it has a low-interest rate, this is why the USD/JPY is the favorite Forex pairs for investors.
Beginners are recommended to swing trade when dealing with the USD/JPY. This means to open positions for the long-term to take advantage of the Gopher’s long trends, whether it’s bullish or bearish.
AUD/USD, the Aussie
Among the most interesting currency pairs to trade for beginners, the AUD/USD holds an important place. Indeed, traders can easily analyze this pair by studying it through different indicators.
The Australian Dollar vs the US Dollar is one of the strongest pairs in long-term trends. It has plenty of liquidity and good conditions for the short-term too.
Keep in mind that the Australian dollar is strongly correlated with gold, silver and basic resources in general, as the Australian economy is tightly dependent on commodities.
Beginners can easily tame the Aussie by studying its long and steady trends by using indicators or simply by looking at its price action. A trend trading strategy is the best fit for the AUD/USD.
USD/CHF, the Swissy
The USD/CHF is less active than the four major pairs above. It is a good barometer of fear: it recovers when the general economic climate is optimistic and plunges in periods of recession.
One of the particularities of the USD/CHF currency pair is undoubtedly its strong dependence on the economic situation. This can be explained by the fact that the Swiss franc tends to play its role as a haven when other economic values lose points.
This situation has long been historically verified and confirms the international importance of the Swiss franc. The currency has seen a strong appreciation during the recent major economic crises.
The Swissy is a trendy pair, which means that its movements, whether bullish or bearish, are both strong and long. It is therefore ideal for beginners to apply a swing trading method and profit from its large swings in price action.
EUR/GBP, the Chunnel
The euro’s currency pair with the pound sterling is excellent in terms of liquidity and cost of the spread. It is a popular pair in the intraday market.
The EUR/GBP pair has a low volatility and it is recognized as a trending cross. This means that long bullish or bearish trends can usually be observed on this cross with few intermediate fluctuations.
The Chunnel is less subject to random movements thanks to its low volatility. Therefore, beginners should trade the EUR/GBP using intraday trading methods. You will be able to take advantage of its slow but consistent trends.
I highlighted the most interesting Forex pairs for beginners. There are some popular pairs like the USD/CAD (the Loonie) and the GBP/JPY (the Dragon); but these pairs are more volatile and hard to predict. As a beginner, you should stick to the one listed above.
What about commodities?
Most beginners falsely take commodities for Forex pairs. This is since they share the same notation —/USD.
The most popular commodities among traders are gold (XAU/USD) and oil (XTI/USD). Their symbols can change depending on the brokers.
Gold is undoubtedly a safe and profitable investment. Indeed, precious metals are not subject to the fluctuation that constantly strikes the currencies. XAU/USD is a haven that survives financial crises such as devaluation or inflation situations.
Safety is not the only strength of gold. Its ability to generate huge profits attract investors. Trading this metal allows speculators to take advantage of the leverage to further increase their profits.
Also, long-term investors are interested in gold. It is almost a risk-free investment. Indeed, its rarity and the increase of the world population show us how gold is important.
Forex beginners can easily take advantage of the XAU/USD, particularly during financial uncertainty. the Gold value increased significantly after the 2007-2008 world financial crisis.
Oil, the black gold
Oil maintains a prominent place in online trading. Many investors speculate on the price of the black gold.
Even if its price can move sharply due to geopolitical tensions, oil remains a profitable investment. Like gold, oil is an asset that is becoming increasingly scarce, which allows it to increase in value.
Besides, high demand is also an important factor. Despite the rise of new energies, oil is still the most efficient among all.
The oil market is now open to all traders. Everyone can invest in oil via CFD (Contracts For Difference).
All you need is a basic knowledge of technical and fundamental analysis. Trading platforms also offer new traders all the necessary tools to trade. It is no longer necessary to be a specialist to speculate on oil.
XTI/USD is suitable for beginners who are looking for a mid-term investment. Since 2016, the average oil price is increasing month after month.
Cryptocurrencies or digital currencies
Cryptocurrencies are a new type of currency that has gained huge popularity over the past few years. They are overly hyped on the internet.
Cryptos are virtual currencies that use digital encryption for their operations. Their transactions are carried out without the need for intermediaries.
These digital coins use cryptography to create a secure environment, with greater privacy and that do not respond to the control of any country or institution, since they are decentralized.
These virtual currencies began to emerge in 2009 when Bitcoin was created and proposed as an alternative currency that is not controlled by banks. Until now, a multitude of cryptocurrencies has appeared and created a new market of digital currencies where more and more people invest and use it for payment.
The biggest difference between these new currencies and conventional money is that cryptocurrencies are only traded on the web, and we can only have it in a digital form.
There are some advantages but also disadvantages of Cryptocurrencies against traditional money as we know it. Some of the benefits have already made many people use these cryptocurrencies to buy goods and services.
But the crypto-market itself is rather new and volatile. Cryptocurrencies are subject to emotional investments and can make astonishing fluctuations in a matter of a few hours.
Bitcoin, the most popular cryptocurrencies made more than 2000% growth in 2017. But it also lost more than 60% in 2018. This is way too volatile for a beginning Forex trader. If you invested $10000 in Bitcoin in January 2018, your investment would turn into less than $4000 in October 2018.
Beginners should avoid the cryptocurrency market because of its volatile nature.
You can compare Forex trading to surfing. Let’s imagine that you are learning to surf. There are beaches with waves that barely reach two meters and others whose waves easily surpass six meters or more.
In the process of learning, it would be complete madness to start surfing waves that are several meters high, as you would surely end up drowned.
It’s safer to start with small waves that represent a lower risk. The same idea applies to Forex. As a beginner, you should stick to the Forex pairs that are less volatile to protect your trading account.