Trading Forex Pairs
Trading Forex pairs is kind of like visiting a candy store. Some candy is very popular, some not as much, and some might be a bit stale because the inventory doesn’t get moved much. Some, while a bit unknown, are especially sweet and delicious, while others are not so great.
Surprisingly, we get this question more than you’d imagine. Some ask;
“Can I trade every pair a broker has to offer?”
Of course, you can, but there really is no need for it. Some pairs are just very difficult to trade effectively because their currencies are either too volatile, not volatile enough, not newsworthy and therefore thin volume, spreads are ridiculously high, and so forth.
“Should a beginner only concentrate on one or two pairs before trading other pairs?”
No, why limit yourself. There is no reason to get to “know” a Forex pair because trading it through the technical lens takes nearly all the subjectivity out of trading, which is a good thing.
“Should beginners stick to trading only US Dollar pairs?”
Same answer here. It doesn’t matter whether it’s the GBPJPY or the AUDNZD. As long as both parts are from the “big nine” (which we’ll talk about momentarily).
There are other variations of the same question, but you probably get where we’re going.
Major, Minor, Exotic
There was a kind of pecking order among Forex pairs which started back in the day (and still continues today) which were defined as;
Major — a currency pair that includes the US dollar and another widely traded currency.
Minor — also called a cross currency pair, is a currency pair that DOES NOT include the US dollar (USD) but involves two other major global currencies like the Euro (EUR), British Pound (GBP), or Japanese Yen (JPY). Examples include EUR/GBP, GBP/JPY, and EUR/AUD.
Exotic — those that involve one major currency (like the USD, EUR, or JPY) paired with a currency from a less developed or emerging economy. They are typically less liquid and more volatile than major and minor pairs, which can lead to wider spreads.
Typical List
Below is a typical list from a popular broker. Some brokers have more, some less.
Below, we’ve highlighted those pairs we advocate trading.
And finally, we’ve broken out those which you are welcomed to screenshot and post next to your screen as a reminder.
Faithful…to a Fault
I never understood traders who swear by one or two favorite currency pairs and refuse to look at anything else. Honestly, it makes no sense. Every pair will trend, chop and flatten at one time or another on every time frame. You must understand that every pair offers opportunities, you just need to let them come to you – never force a trade because you insist on trading a particular pair. If XXX/YYY pair does not give you what you want, move on.
Broaden Your Horizons
As our table suggests, look at all pairs which are made of the nine major currencies; USD, EUR, GBP, CHF, JPY, AUD, NZD, CAD, and SGD. There are 36 different tradable combinations from these nine currencies. Some may refer to various combinations as “Major”, “Minor”, and “Exotic”. However, considering that these are the nine major currencies, those terms really don’t mean anything to us. “Minor” and “Exotic” may be considered as outlying currency pairs that have thin markets (little volume), and the lack of available financial news gives us good reasons to let others worry about them.
By screening these 36 pairs without any feelings for one or the other (because they are not sports teams), you afford yourself a much stronger possibility for finding optimal trade setups with the best chance for success. So, why limit yourself to only one particular pair?
Institutional Manipulation
Additionally, you should be aware that anything crossed with the USD are closely monitored by the Big Banks and major institutions who have the power to manipulate prices, and generally messing up your groove. Strongly consider starting with currency pairs which don’t have the USD as either the cross, or the base; like the GBP/JPY. If this is something new or doesn’t make sense – don’t worry, we’ll cover this in depth in another blog…
Stay open-minded. Never “marry” a particular pair. They don’t love you. And even more important, they don’t care who you are, how you trade, or what you look like.
“Easy” vs “Difficult”
We have often heard traders make the claim that one currency pair is “easier” or “difficult” to trade over another. My response was a bit shorter on Quora, but here…you’ll get the full story.
Below, we’ll quickly review the claim of easy versus difficult by other traders and why it really doesn’t belong in our trading thought process because it only complicates things.
Trading Style
“Easy” to you may be what someone else finds difficult…it’s all relative. Start with your personal style of trading. Whether you are a scalper, day trader, swing or position trader will determine if a particular currency pair is easy or difficult. Trading extremely short time frames demands that you dedicate your full attention to the screen. Look away for a moment and might miss something. This not an easy way to trade, regardless of what pair you are looking at. Longer time frames afford the trader more tolerance.
Flex and Buckle
All currency pairs flex though various market conditions. Dead, choppy & volatile, and trending can determine whether a particular pair is “easy” which leads us to the trading style of the individual. This is important, because it leads to your “field of view”, or what you define as the current market based on what you see. Let’s explore this further…
What do you see here? Without any reference, you don’t really know this currency pair’s market condition. Not knowing which pair and the timeframe, it’s just a random chart. Some might consider it flat, others trending, and some may consider it choppy.
Now, let’s view from a higher level.
Could it be just a little dip in an upward trend? Let’s back out to an even higher level.
Or is it just part of a flat market before a downtrend? Now, let’s change the time frame.
When we backed out even further, it’s really nothing at all.
Are you a trend trader looking for trending big moves (yay!), or are you trying to find tops and bottoms instead (boo!)? Depending on the market state of a currency pair and time frame, the chart may be attractive to some traders and considered “untradable” to others.
Our only goal is to make you a better trader.
BTW – Any information communicated by Stonehill Forex Limited is solely for educational purposes. The information contained within the courses and on the website neither constitutes investment advice nor a general recommendation on investments. It is not intended to be and should not be interpreted as investment advice or a general recommendation on investment. Any person who places trades, orders or makes other types of trades and investments etc. is responsible for their own investment decisions and does so at their own risk. It is recommended that any person taking investment decisions consults with an independent financial advisor. Stonehill Forex Limited training courses and blogs are for educational purposes only, not a financial advisory service, and does not give financial advice or make general recommendations on investment.