best pairs to trade forex: 10 Best Forex Pairs To Trade in 2023
As one of the larger, more stable currency pairs, EUR/USD doesn’t provide enough volatility to offer value to most day traders. But for swing traders, there’s potential to turn a profit over a multiday or multiweek position. And although the volatility isn’t ideal, the high liquidity of the EUR/USD forex pair lends itself well to swing trading, especially for beginners looking for straightforward forex pairs to cut their teeth on. Additionally, the volatility needs to generate price movements over a relatively short period of time—somewhere between days and weeks. As it is possible to trade all currencies around the clock, the best currency pairs to trade at night depend on the individual risk tolerance of the trader and their preferred trading strategy. Trading forex overnight presents opportunities for both long-term investment strategies as well as short-term strategies like scalping.
As you get started with forex swing trading, it’s important to watch a wide range of pairs so you can identify the best opportunities. If you limit yourself to monitoring only a few swing trading options, you’re likely to miss out on high-value trading opportunities. Of retail investor accounts lose money when trading CFDs with this provider. In normal market conditions, there’s often between a 1-5 point spread between the bid and offer on major currency pairs and liquid cross rates. But when liquidity is low, this gap can widen and so more capital would be needed to cover your fees.
The currency pair is nearly always grouped into the volatile category, and these large jumps have contributed a lot towards the popularity of the GBP/USD. But remember, with greater volatility comes greater risk, making it important to set stops and limits to protect your trades. 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.
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If the British economy is growing at a faster rate than that of America, it is likely the pound will strengthen against the dollar. However, if the American economy is doing better than the British economy, the reverse is true. This pair has been sensitive to political sentiment between the United States and the Far East. The pair tends to be positively correlated to the USD/CHF andUSD/CADcurrency pairs due to theU.S. The pair is perhaps one of the most difficult exchange rates to predict, because of the close but uncertain link between the economies.
For example, if the EUR/USD pair ended the US session close to thetechnical resistance, it could move lower in the Asian markets overnight. However, trades should always conduct their own due diligence to identify such signals. 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.
In most cases, swing trading only involves the use of technical analysis, which simplifies your trading research and contributes to the reduced time commitment of forex trading. The best time to trade currencies is typically when the market is most active and liquidity is higher. In the hours when more than one of the major markets is open and there is an overlap in trading activity, currency values tend to fluctuate more, creating opportunities to speculate on volatility. 84% of retail investor accounts lose money when trading CFDs with this provider. As such, traders should keep an eye on the price of both Brent crude and US crude when trading USD/CAD, as any fluctuations in the oil market will likely reverberate in the exchange rate of this forex pair.
Just like the first two most popular currency pairs on this list, the quote price of GBP/USD is affected by the respective interest rates set by the Bank of England and the Fed. The subsequent differential between the interest rates on the pound and the dollar can have a great effect on the price of the GBP/USD currency pair. Traders have the luxury of highlyleveragedtrading with lowermarginrequirements than inequity markets.
Major Pairs
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. USD/CAD is commonly called the ‘loonie’ on account of the loon bird which appears on Canadian dollar coins, and it represents the pairing of the US dollar and the Canadian dollar. In 2019, USD/CAD transactions made up 4.4% of daily forex trades.1 The strength of the Canadian dollar is closely linked to the price of oil because oil is Canada’s main export.
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. The pair’s long trend movements serve as one of the great advantages of swing trading EUR/CHF, allowing traders to use technical indicators to identify opportunities early in their development. This gives swing traders an opportunity to maximize their profits by opening a position and riding the price gain or loss for the bulk of this long trajectory. If you are considering trading currency pairs overnight, we recommend that you always do your own research before risking any money.
EUR/USD – or the ‘fibre’ – is widely considered the most popular forex pair as it typically comes with the highest volume and among the lowest spreads. Unsurprisingly, its popularity also stems from the fact it’s the best way to take a position on two of the largest economies in the world – the United States and the Eurozone. Traders who are interested in taking a longer-term position might choose less volatile pairs, while shorter-term speculators might be happy to scalp smaller profits off quick price movements many times each day. The EUR/JPY accounts for roughly 3.93% of the overall daily volume traded on the foreign exchange market, followed by the GBP/JPY with 3.57%, and the EUR/GBP with 2.78%. As the EUR/USD is the most heavily traded currency pair, the spread on this forex pair is generally very small .
Less volatility
Currencies are always traded in pairs because when you buy or sell one currency, you automatically sell or buy another. In every currency pair, there is a base currency and a quote currency – the base currency appears first, and the quote currency is to the right of it. The AUD/USD currency pair tends to have a negative correlation with the USD/CAD, USD/CHF, and USD/JPY pairs due to the U.S. dollar being the quote currency in these cases.
The overlap between the Sydney and Tokyo markets trading offers a two-hour period of increased price fluctuation as there are more traders in the market. The one-hour overlap between the Tokyo and London markets can also see changes in price action, although there is less time for large fluctuations. The markets that are open overnight will depend on where you are located. But as the vast majority (80%) of currency trading occurs on the North American and European markets, night trading typically refers to the Asian currency markets. This information has been prepared by IG, a trading name of IG Markets Limited.
USD/JPY
Economic growth in South Korea has been so impressive – especially since the end of the Korean war in 1953 – that people often refer to it as the Miracle on the Han River. The South Korean economy has grown during the turn of this century to become the fourth largest in Asia and the eleventh in the world as of November 2019. This could be a reason for the increased activity that USD/KRW has experienced, as traders and speculators seek exposure to another key Asian market, besides those of Japan, China and Hong Kong. The yuan has largely been decreasing relative to the US dollar since the start of the US-China trade war. Much in the same way as the Fed and ECB, the Bank of Japan sets the interest rates for the Japanese economy which, in turn, affects the value of the yen relative to the US dollar.
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While EUR/USD leads the way in terms of daily traded volume in forex pairs, there are a number of other viable currency pairs with high liquidity that traders can choose from in an attempt to realise a profit. As a major currency pair, EUR/JPY offers high liquidity that appeals to swing traders. Current economic events in either Europe or Japan can have a direct impact on this forex pair, creating reliable technical indicators that swing traders can use to turn a profit. Known as a major commodity forex pair, NZD/USD is one of the best forex pairs to trade for swing trading because its price swings are often correlated to movement in a commodity market. New Zealand is a top five global exporter of dairy, and the combination of this market influence with the high liquidity and volatility of this forex pair makes it a great option for swing traders to follow.
The third and final major commodity forex pairing, AUD/USD is heavily influenced by the precious metals and other exports leaving Australia and the international market for those commodities. Because of its strong economic relationship with China, the AUD/USD pairing is great for trading on the fluctuations in the Asian and American markets. This pairing also offers high liquidity, which will attract swing traders who are eager to capture quick profits. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money. Exotic currency pairs typically include one major currency paired with a currency from a developing or emerging country. Some of the most popular exotic pairs are the USD/SEK, USD/NOK, USD/MXN, GBP/SEK and USD/ZAR – listed according to their daily trading volume.
