Choosing Forex Pairs

Choosing Forex Pairs! As you look at the Forex pairs on your broker’s list, it might remind you of a dartboard. Just throw a dart at any of the Forex pairs and hope that’s the right one to trade. This is definitely a viable solution. However, there is a rule of thumb that helps newcomers to the Forex world that comes in handy. It’s called, “Think Liquidity”.

Particularly as a Forex novice, you want to be able to get into the market, but even more importantly, you want to be able to get out. There are few things more frustrating than losing a profit or increasing a loss because you can’t find anyone to take the other side of the trade.

Leave the obscure Forex pairs to the experienced trader. Stick to the playground where most of the kids are playing. It’s less dangerous. Generally speaking, anything involving the USD is a good place to be. By virtue of its east coast trading times, the majority of Forex traders around the globe are there to trade with. The liquidity is greatest during these time periods. Of the Forex pairs involving the USD, the highest volume consistently seems to be in the EUR/USD Forex pair.

The spread is usually tight and easier to trade, particularly for those that want to get their feet wet. The wider the Forex spread, the higher the volatility. In the beginning, Forex trading itself should offer excitement enough. There will be plenty of time to expand horizons and add to excitement. It’s the old, “crawl before you walk” system. Plus most Forex trading systems are developed around primarily this Forex pair, so there is a wealth of information out there to be taken advantage of.

Other good starting Forex pairs are GPB/USD and USD/JPY. Again, all of these include the USD so you know the liquidity will be there. The spread on GPB/USD is usually higher than the EUR/USD and should be watched more carefully.

One step at a time. Forex trading all sorts of combinations does not increase your chance of sustaining profits. It is better to concentrate on one market until you feel comfortable enough to move on to something else. There are traders that trade all sorts of obscure Forex pairs, but these are all people with vast experience and there is always method behind their madness. Leave that to them. You’ll have plenty to hold your interest, and there’s enough money to be made in a concentrated effort. Choosing Forex Pairs

In the process, you’ll be better able to track the behavior of the market because it will have certain nuances that, after a certain time, you’ll be able to spot from previous experience. As long as we’re throwing around old adages, you shouldn’t become a “Jack of all trades, master of none”. It never worked out for Jack, either.

Choosing Forex Pairs

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