Top Currency Pairs to Trade in 2019
Foreign exchange market (Forex) is a market with the largest volume of world business. You find all the countries in the world participating daily in forex. Collectively, the world experience a trading volume of over $4 trillion daily. Despite this massive trade, forex remains the most tricky business to most traders. It is hard to determine the best currencies to trade.
Though this market primarily exists to facilitate the exchange of currencies, many traders plunge into it to make money. Thus, they will seek to know the best currency pairs to trade to derive maximum profit. While getting the answer is a daunting task, the pairs to trade depend on your risk-appetite and trading style. Nevertheless, the top dominant currency pairs in 2018 will continue into 2019.
Statistically, these dominant currency pairs have had the most trading volume for many days. They also comprise the most powerful and the largest global economies. These currencies are the major and most popular among traders from every part of the world, and they include:
EUR/USD (Euro – US dollar)
GBP/USD (British pound – US dollar)
USD/JPY (US dollar – Japanese yen)
USD/CHF (US dollar – Swiss franc)
USD/CAD (US dollar – Canadian dollar)
AUD/USD (Australian dollar – US dollar)
NZD/USD (US dollar – New Zealand dollar)
These major currencies are mainly preferred because they have very high liquidity and large transactions. Also, they provide a good trading condition with a lower spread. However, they are not necessarily the best to trade. They tend to fluctuate thus highly volatile. You can make or lose money on these fluctuations.
According to these major currency pairs, the most dominant is the US dollar. It derives its supremacy from the sheer size of the US economy as it’s the world’s largest. You may wonder among the popular currency pairs, which is the best to trade. For you to succeed in forex trading, you require to have an exclusive understanding of currency pair you want to trade.
How to Find the Best Currency Pairs
The forex trade is similar to other trades like the commodity, futures and stock markets. It is driven by some catalysts commonly known as the ‘lead indicators’. Your best bet for forex trade is a currency pair that is outperforming the market overall. The lead indicator to check is the US Dollar Index (DXC). This index measures the value of US dollar relative to a basket of currencies of US most significant trading partners. If US DXC is rallying, pairs such as USD/JPY, USD/SEK, USD/CHF, will rally in tandem with it. Meanwhile, EUR/USD, GBP/USD, NZD/USD and AUD/USD & will sell-off.
While the aforesaid is the case, which pair or pairs offer the best trading opportunity? You should focus on pairs that are performing better than DXC like USD/JPY, USD/CAD, & USD/CHF. Pairs like AUD/JPY and AUD/USD are much weaker than DXC. Here is an illustrative graph to guide you.
Therefore, when planning your forex trade, check how that pair you want to trade is performing relative to DXC.
The Best Currency Pairs to Trade
Here is a detailed analysis of the best currency pairs.
This Currency pair is the most popular. It also has the lowest spread among the modern world foreign exchange brokers. If you are risk averse, this is your pair as it is not too volatile. There is a lot of certainty in it. Moreover, a lot of information concerning this pair is available. So, you don’t have to base your trade on guesses.
This pair continue gaining its popularity from large jumps in profitable pips. While it is more profitable, the risks associated are greater. This currency pair can be classified into the volatile currency category. Nevertheless, many traders choose it as their best pair since they can find a lot of market analysis information online. Unlike other major currency pairs association with tight spreads, it is not the case with this pair.
You can spot this currency pair regularly in the forex trading. It shows low spreads and depicts a smooth trend when compared to other currency pairs. You can realize exciting, profitable opportunities with this currency pair.
Concerning spread, many traders prefer to avoid high spread as trading experts recommend. They advise taking a spread that is around 0-3 pips. Most currency pairs consider one pip as a movement in the fourth decimal place. Whereas a pair exceeds 6 pips, you should consider it to be too expensive and can lead to big losses.
Don’t consider this to mean totally avoiding high spreads; rather you should trade with a lot of sense. Ensure to exercise risk management while trading to manage the risks effectively.
Unique Currency Pairs that Include Native Currency
Typically, you should select a pair that you are most well informed about. It is worthwhile to consider trading with currency from your own country. This is important even when it is not included in the major pairs. It is particularly advisable if your local currency is well volatile. Consideration of your local currency lies on your knowledge on your country’s political and economic issues.
Mostly, your local currency will be quoted against USD. Therefore, if your trading involves your domestic currency, knowing USD currency will be essential.
With as many as 200 countries in the world, there are equally many currencies available. And, as globalization becomes more pronounced, the dynamics of forex trading get more evident. Thus, it is necessary to study the market thoroughly before committing to forex trade. You can also practice many currency pairs using a risk-free demo account. You can identify the best pairs to trade and the best way to do it.
If you are a beginner, don’t trade many currencies at the same time. Specialize in one or two currency pairs for better results. Also, seek to expand knowledge about the most successful world trading pairs. Gradually grow your trading portfolio to include new currency pairs. This hands-on experience will provide you with vast insight into the forex trade. In no time you will leap big.