Choosing a currency in trading has always been a vital part your career as an investor. The foreign exchange market is a place where price fluctuations occur very often and without any prior notice. Therefore, investors are always on the watch for any chances of price change. As this creates a pull in the supply and demand of a product in the market, the price changes according, and because of that, a rising market can fall apart overnight. This makes the market a scary place for many currency exchange investors.
When an investor first joins this platform, they usually get a bit confused with the numbers and shifting. That’s why it becomes a risk for them to trade without any proper knowledge. Again, many of them don’t have a clear idea of what is the best asset to trade. Not dealing with the proper asset could be a huge problem as it could make your work a bit puzzling. Now it is not unknown to anyone that making a small mistake can be highly detrimental to your currency trading.
In the currency exchange market, choosing the right currency to deal with is such a sensitive issue that if you don’t select the right one, you might not be able to make money. However, unfortunately, not many have the proper concept of picking the right trading instrument. That’s one of the reasons why many investors fail in making money. Now when you are searching for the right pair, you need to keep in mind that several types of currency pairs remain in practice. So, let’s get a small briefing on the types of currency pairs.
There are eight major currency pairs and all of them include the currency USD. These pairs always contain USD on one side and due to their high volatility, they have gained a reputation for themselves in the market. These currency pairs are the highest traded pairs in the market today. Excluding USD, the seven major currencies are EUR, GBP, JPY, CAD, AUD, NZD and CHF. And if you trade with a high leverage account, you will notice the leverage factor will often change based on the currency pair you are trading. So, try to learn how Forex leverage works from the start. Experienced traders don’t have to focus on the leverage change as they always trade with low leverage account.
The Cross-currency pairs are also known as the minor pairs. The crosses include all the currencies that remain in the majors except for the USD. These pairs also have high volatility and are traded a lot in the market and provide a lot of trading opportunities. However, their transactions are much less than the major currency pairs.
This is a group of currency pairs of the emerging economies. Some currency pairs are not as frequently traded as the majors or crosses but due to their flourishing economy, the market for these currencies is widening. They include the currencies of countries like Brazil, Mexico, Chile, Turkey, etc.
How to choose a currency pair?
Now, the higher the volatility of a currency pair is, the more trading opportunities it provides to other people. Based on that, you can choose the right pair to work with. If you are looking for high trading opportunities then you should go for the majors or the crosses. Then again, you can also make the exotics your options as their market can change easily due to any geopolitical event. When you are looking for a long-term opportunity, you can look for currency pairs that move slower compared to other currencies. Again, traders have to choose currency pairs that are provided by their brokers. So, even if you select the right pair but your broker doesn’t facilitate your trading that asset that, you can choose to change your broker. This is because a broker should always be able to fulfill your trading needs.
So, amongst hundreds of currency pairs, you need to find out which one works best for you.