When finishing reading this article, you’ll know which are these Top 3 Forex Currency Pairs to Trade and the most important factors which cause volatility in the currency markets.
There are many currency pairs to choose from, as you already know, existing that many, also exists lots of opportunities. And lots of risks because the currency markets are continuously open during business days.
It allows the currency market trader to focus on currency pairs which suit their circumstances and work-life balance.
Currency pairs that make you profit.
There are different economic market movers for different currency pairs. For example, if you like commodities like Oil, then you may like currency pairs linked to oil sectors.
Trading currency pairs are highly technical in nature and favoured by technical analysts.
Needing to know more about technical analysis? Click here to read our detailed text about The Three Most Popular Types of Charts for trading.
There are four major currencies around the world; the Pound, US dollar, Euro and Japanese Yen. You always have to aim at trading currency pairs with one of these currencies within them.
Currency Pairs, the Basics:
Forex and currency trading are interchangeably used, and this represents the same market.
The currency pair displayed on the left is the base currency, so if you see a currency pair with the English pound on the left and the USD on the right, the currency pair traders will have “CABLE.”
You know the base currency represents the pound, the currency on the right represents the quoting currency or you’re trading on, is whether or not the base currency will strengthen or weaken against the quoting currency.
For instance, if you think the English pound will strengthen against the US dollar an increase in value, then your next position should go long, however, if when thinking the pound will weaken against the US dollar, then the position would go short.
Traders often ask, what they should learn to understand what moves the currency markets?
Although depending on the specific pair they want to trade, one thing is for sure; central banks are crucial for the price action of all currency pairs.
So let’s have a look at those:
There are four major world central bank’s.
The Federal Reserve of the United States represents a significant influence over currency pairs involving the US dollar and Beyond.
FOMC meetings held eight times per year a particular focus. Driving trader´s market attention, because of key interest rate decisions. Your task will come to know when these meetings occur.
European Central Bank, similar to the Federal Reserve of US. They hold regular meetings which represent a major global event for currency trade. These events are especially important when the currency pair opened positions contains the Euro. Make sure you get familiar with these meetings.
The Bank of England, a central bank with headquarter in London. Meetings are regular, and inflation rates are especially important to the Bank of England. The bank sets an annual benchmark and aims to keep inflation at a fixed figure. Deviations away from this figure can trigger interventions, including interest´s rate rises and falls which cause volatility of all currency pairs with the pound.
Bank of Japan, holds regular meetings around 12 times per year and carries out many of the same functions as of the other central banks above. Traders based in the UK, and Europe, should keep an eye on when these meetings occur. Consider their trades and risk, if they are trading currency pairs containing the Yen. Especially during the unsocial hours in which the Yen trades.
Would you like to look for opportunities on this Top 3 Forex Pairs to Trade?
There’s a reason why they are traded the most because they are the best to trade.
With these major pairs traded the most around the globe, it means they’re the ones holding more liquidity — also less risk for significant gaps. Not depending on a broker, and also brokers offer tighter spreads to traders.
These pairs offer near 24/7 trading hours, and critical events are happening very often. Most traders can trade around, including when European markets open, as well as when the US open and close.
So let’s look at the reason some of these pairs are so popular
Over the past years, the EUR/USD market traders made significant profits from shorting the lows and longing the highs of this range around the market. All traders had to do, mainly the need to wait for the market to come down or bearish to the lows and go long or hawkish, then wait for it to come down to the highs and go short and then be patient again keeping disciplined positions and hold.
Traders of the dollar-yen have taken advantage of a longer-term uptrend where they’ve gone long from the lows and held the market as this one made several higher highs over the whole month. Thus incrementing their profit.
Cable traders have benefited from two distinct periods of momentum.
Here, in this uptrend on the left. We can see many green candles pointing to higher closes. And to the right, we can see red candles calling lower exit points.
There are two distinct patterns here, a strong uptrend and a strong downtrend and traders took advantage of the technical indications, indicating these trends were occurring and also continuing to have made significant profits.
To summarise, stick with the main pairs.
The big three: EUR/USD USD/JPY and GBP/USD, is the Top 3 Forex Currency Pairs to Trade we recommend starting with and continuing on trading.
Avoid trading minor or obscure pairs of currencies; there will be less liquid, mass subjective volatility in the news, less technical and higher risk per trade.
Trade the currency pairs we can monitor and understand central bank news whether the US Federal Reserve, European Central Bank, Bank of England or the Bank of Japan.
Many market traders live from just trading only one of these three pairs, then at most, remember you need to master these three pairs.
Don’t worry about what’s happening on the rest.
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