There are dozens of Forex currencies available for trading, but what makes the best pair for currency trading? Is trading some currency pairs easier than others and, if so, why?
Forex is the most liquid global financial market, trading over $6.6 trillion 24-hours, five days a week. There is plenty of opportunity for experienced or novice Forex traders to make a profit from trading Forex.
Most new traders want to know which currency pair is the most profitable in Forex and the best Forex pairs to trade. There isn't a direct answer to which is the best currency pairs to trade right now. Many factors determine the outcome of a Forex trade.
In most cases, trading the major currencies is the preferred option for Forex traders. Liquidity and volume are high, and because the major Forex currencies are all paired with the U.S. dollar, the price often trends. A trending market is easier to read and identify bullish or bearish movements on the charts.
You may want to know the most predictable currency pairs and, in this article, we will discuss what makes one currency pair easier to trade than another. We will highlight five of the top Forex currency pairs to trade. Four of the currency pairs are major currencies. But we will look at a minor Forex cross pair with significant liquidity and volume that could be a choice for a Forex trader with some experience of trading the Forex market.
- What Makes a Forex Currency Pair Good to Trade?
- The 5 Best Forex Currency Pairs to Trade
- Recap of What Are the Easiest Currency Pairs to Trade
What Makes a Forex Currency Pair Good to Trade?
To trade Forex successfully, you need liquidity and volume because that is what creates price movement. A Forex trader makes money from the price fluctuations between a currency pair.
For instance, you take a EUR/USD trade at $1.19, and your exit for target profit is $1.20. The EUR/USD price shows as $1.1920/1.1901. The first price is the EURO buy price, which is the base price. The USD price is the quote price.
If you wanted to buy the U.S. dollar, you would purchase a SELL order because you buy the dollar even though you are selling in the Forex market. If the price drops, it means the dollar is stronger than the Euro.
When the EUR/USD price hits $1.20, your order closes, and you make your profit, which is the difference between $1.19 and $1.20.
Trading Forex is challenging, and there is a 95% failure rate for Forex traders. Yes, that is a dismal figure, but it doesn't mean it's impossible to make a living from trading Forex. It takes time to develop the trading skills and the mental prowess to trade Forex successfully.
Many novice Forex traders look for the magic technical indicator or the failproof system. These things do not exist. Trading Forex takes commitment and dedication to become a better trader. When Forex beginners search for what is the easiest currency pairs to trade. What they really want to know is how not to lose, and that isn't possible.
When you trade Forex, the objective is to gain profits exceeding your losses. It's that simple. You could lose 70% of the time, but you can stay ahead and make consistent profit from trading Forex if your wins outsize your losses.
What makes a currency pair good to trade is how skilled you are at analysis, patience and timing. A professional Forex trader can trade any currency pair with a high probability of winning.
As a beginner to Forex, it's understandable that you want Forex to be as straightforward as possible, so choosing the right currency pairs to trade can help to give you an edge. So, in the next section, we feature five of the best Forex currency pairs to trade.
The 5 Best Forex Currency Pairs to Trade
As we mentioned earlier, liquidity and volume are the two things needed to trade Forex successfully.
The five featured Forex currencies all tick that box. These currency pairs are easier to read than many other Forex currency pairs, primarily because they are often trending pairs.
When a currency pair reverses price and starts a new trend, it presents many opportunities for identifying high probability Forex trades.
In this section, we will look at the following Forex currencies:
- EUR/USD - (Euro/ U.S. dollar)
- GBP/USD - (Pound sterling/ U.S. dollar)
- USD/CHF - (U.S. dollar/Swiss Franc)
- USD/CAD - (U.S. dollar/Canadian dollar)
- GBP/JPY - (Pound sterling/Japanese Yen
#1 to #4 are major currency pairs, and the wild card, GBP/JPY, is a minor currency cross pair. We will explore current technical analysis and determine the best currency pairs for trading right now.
EUR/USD (Euro/ U.S. dollar) is an ideal major currency pair for beginners. Unlike some Forex currency pairs, EUR/USD has volatility but not so much that Forex beginners get caught with huge price spikes.
EUR/USD is ideally suited to technical analysis.
EUR/USD respects historical price zones, so when the price breaks and retests a zone, it's a strong indication that the price of EUR/USD is on the move.
The above image is the weekly chart for EUR/USD
We have listed the number of touches around the historical price zone of $1.16.
- #1 - August 2015
- #2 – May 2016
- #3 – October 2017
- #4 – May 2018 – August 2018
- #5 – January 2019
- #6 – September 2020 – October 2020
At least once a year for the last seven years, EUR/USD has broken through or reversed from the $1.16 support and resistance zone. This area is a historical zone. These areas exist as areas of sentiment.
Over the years, as Forex traders observe the price of EUR/USD at this zone, it has become a highlighted zone where traders now look to take a trade. In many ways, the historical price zone eventually becomes self-perpetuating.
But what is happening right now with EUR/USD? Is the price trending up or trending down?
The above image is the 4-hour chart for EUR/USD
Currently (July 2021), the price of EUR/USD is around $1.18 but is in a descending channel. The two lines on the chart are the 50 EMA (blue) and the 200 EMA (red), and the price has just rejected the 50 EMA.
However, the price was rejected at $1.1762 and failed to make a new low.
Extend the channel further, and it could be that EUR/USD is preparing for a move higher and break of the descending channel.
EUR/USD has periods of moving sideways, but it is easy to spot when the price of EUR/USD is gaining momentum.
GBP/USD (pound sterling/U.S. dollar) is another major currency pair to trade for Forex traders. GBP/USD is suitable for trading for intermediate and experienced traders because the volatility is greater than EUR/USD.
With a bit of experience of price action, novice traders may enjoy trading GBP/USD.
The image below is an overview of the GBP/USD daily chart
The bottom of the big dip on the left is March 2020, when the U.K. went into the first lockdown period for the Covid-19 pandemic. The price was $1.14. From then, GBP/USD has driven upwards to a recent high of $1.42.
But let's take a closer look at what is happening with GBP/USD.
The above image is the 4-hourly chart for GBP/USD
GBP/USD was moving into an ascending triangle pattern, but two days ago, at the close of the trading week, the price of GBP/USD nosedived out of the triangle and made a new low of $1.3661.
These are the types of moves where Forex traders can grab opportunities for profitable trades.
In this scenario, a retest of the bottom of the triangle could indicate further drops to the downside.
GBP/USD has more price action than EUR/USD, creating more chances for high probability trades. It is a currency pair suited to Forex traders who can read price action.
USD/CHF (U.S. dollar/Swiss Franc) is a major currency pair diametric to EUR/USD. So when USD/CHF is rising, EUR/USD is falling.
The above image is the daily chart for USD/CHF, but it is not dissimilar to EUR/USD in that the price has many historical areas of sentiment.
Since February 2019, the price of USD/CHF has fallen.
From December 2020, the price inched up to new highs and now appears to be forming a triangle pattern. But looking at the 4-hour chart below, USD/CHF is consolidating in a 100-pip range.
If you are trading USD/CHF, wait for the price to break out of the range. It's a 200-pip drop to the trendline below, so if the price pops out of the box then retests, you could aim for that area as a target. The price does seem to be weakening, although it did make a slightly higher high.
Much like GBP/USD, trading USD/CHF currency pair is ideal for intermediate Forex traders and beginners with some knowledge of price action.
USD/CAD (U.S. dollar/Canadian dollar) is a major currency pair, following a similar trajection to USD/CHF.
It's essential to know that oil prices can affect USD/CAD prices. So, for fundamental analysis, check the oil charts to see if oil prices are decreasing or increasing.
The image above is the daily chart for USD/CAD
From February 2019, USD/CAD has been bearish, forming lower lows and lower highs. But, since June 2021, the price has been rising.
Currently, the price is testing a historical price zone. If you look left, you can see how USD/CAD stayed in that price area for a while before breaking further to the downside.
One of two scenarios could happen next:
- USD/CAD price pushes through resistance and then retests before heading higher
- The price rejects the resistance zone, breaks back down, retests the price zone and continues heading lower
All four of the listed major currencies are dollar reactive. So it's vital to check the United States economic data and financial news before trading these pairs. As mentioned, oil prices affect USD/CAD, but all four currencies react to interest rates, inflation rates, GDP and unemployment figures.
Also, be aware that the last Friday of each month is the U.S. non-farm payroll. All dollar pairs react to the data announcement.
EUR/USD is best for Forex beginners, and GBP/USD, USD/CHF and USD/CAD are better currencies for Forex traders with some experience of trading price action. Technical analysis or fundamental analysis.
GBP/JPY (Pound sterling/Japanese Yen) is a minor currency pair, so why is it on the list of the 5 best currency pairs to trade?
Despite being a minor currency cross pair, GBP/JPY has plenty of liquidity and volume.
GBP/JPY follows a similar path to GBP/USD, and indeed, since the drop in March 2020, GBP/JPY has been bullish.
GBP/JPY has been consolidating in an uneven range for four months.
The above image is the GBP/JPY daily chart
Currently, GBP/JPY is approaching the daily 200 EMA at around $1.48, a price that correlates with historical price rejections. If the price rejects $1.48, it could retest the range and push through or retest and move further down.
Trading GBP/JPY is a great Forex currency pair to trade for intermediate or experienced Forex traders. It is in the top 10 Forex currencies to trade because of high liquidity and volume. At times, the price can move fast and sometimes create price spikes.
Recap of What Are the Easiest Currency Pairs to Trade
Liquidity and volume make the price move in Forex currency pairs. It is possible to have too much volatility because, for beginners, it can make it harder to read and understand price action on the charts.
We identified the five best currency pairs to trade:
- EUR/USD - (Euro/ U.S. dollar)
- GBP/USD - (pound sterling/ U.S. dollar)
- USD/CHF - (U.S. dollar/Swiss Franc)
- USD/CAD - (U.S. dollar/Canadian dollar)
- GBP/JPY - (Pound sterling/Japanese Yen
The USD pairs are major currencies, and GBP/JPY is a minor currency cross. All five Forex pairs are the easiest currency pairs to trade for variable levels of Forex experience.
These Forex currency pairs are easy to read and have many historical price zones where the price reacts. The 5 most popular Forex pairs have the best liquidity and volume, which creates the best chances to profit from trading Forex.
When choosing Forex currencies to trade, be aware of correlated pairs, especially the U.S.dollar pairs. For instance, if you took a trade on EUR/USD and USD/CHF, you could have double the risk. If the price goes against you for one pair, it also goes against you for the other pair.
Always check economic news before trading Forex, especially with the U.S. dollar pairs. The dollar is sensitive to world news as well as country-specific financial news.
Avoid trading dollar pairs on the first Friday of each month as this is the non-farm payroll for the United States. Dollar pairs often spike immediately after the data announcement.
If you are new to trading Forex, start trading with EUR/USD. Once you become familiar with trading EUR/USD and have some success, add another pair to your trading, such as GBP/USD. Spend time watching how the price moves and see if you can identify chart patterns and reversal zones.
Trading Forex for beginners is challenging but worthwhile if you stay committing to learning how to trade Forex and focus on becoming a better Forex trader each day.
Please note that the above information is not providing advice on tax, investment, or financial services. We provide the above information without consideration for risk tolerance and a specific investor's financial circumstances.
Trading or investing in financial instruments may not be suitable for all investors. It does involve risk and the possibility of a loss of capital.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Trading Education.
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What are the Best Currency Pairs to Trade Right Now?
The best currency pairs to trade right now are the Forex pairs that show potential movement on the chart. For instance, any of the five best currency pairs to trade, as detailed in this article, are setting up for a change in price movement.
What are the Most Predictable Currency Pairs?
The major currency pairs are the most predictable, mainly EUR/USD.
Which Currency Pair is Most Profitable in Forex?
Any pair with good liquidity and volume can be profitable if you have experience in trading Forex. Instead of trading multiple currencies, become familiar with one currency pair, and you will quickly notice your trading improves.
What are the Top 10 Currency Pairs to Trade?
- EUR/USD - (Euro – U.S. Dollar)
- GBP/USD - (British Pound – U.S. Dollar)
- USD/CHF - (U.S. dollar – Swiss Franc)
- USD/JPY - (U.S. dollar – Japanese Yen)
- AUD/USD - (Australian Dollar – U.S. Dollar)
- NZD/USD – (New Zealand dollar – U.S. dollar)
- USD/CAD – (U.S. dollar - Canadian dollar)
- GBP/JPY – (Pound sterling – Japanese Yen)
- EUR/GBP – (Euro – Pound sterling)
- EUR/JPY – (Euro – Japanese Yen)
All ten currency pairs have good liquidity and volume. 1-7 are major currencies, and 8-10 are minor currency pairs.
How Many Currency pairs Should I trade as a Beginner?
Ideally, a Forex beginner can trade a couple of currency pairs and become familiar with how they work.
The more you know about a currency pair, the more chance you can identify high probability Forex setups. Learn the currency pair patterns and historical price zones.
Mark up the support and resistance areas on the charts and set alerts for when the price reaches these zones.
It's tempting for beginners to try to trade as many currency pairs as possible, but it isn't an effective way to trade Forex. Familiarity with a currency pair means less time and effort trying to work out what is happening on the charts.