How to Pick a Forex Currency Pair for Trading
- 06 Jan 2020
However, your success on the FX market will depend on which currency pair you choose to trade in. When you’re considering your options, remember these key points and find a Forex currency pair that’s right for you.
Look at the Charts
Making successful FX trades relies on you being able to predict their movements accurately. To do this, you’ll need to access market data. Forex charts tell you how currencies are performing, and which pairs are moving up. By taking a look at the charts, you can get an objective and unbiased view of what’s happening in the market.
In addition to this, keeping up to date with market and industry news is important. When political or business news breaks, it often has a considerable effect on the FX market, so it’s vital you know what’s happening. As online Forex trading is increasingly accessible you’ll find that there is a vast amount of information online too. As well as gaining access to the charts, you can view market news, trading tips and professional opinion.
Look for Trending Currencies
A trend occurs when a currency pair moves in a specific direction over a particular period of time. The USD/GBP pair may have been on a downward trend for six months, for example, while the JPY/EUR pairing may have been on an upward trend for the last seven days.
Strong trends are typically associated with pairs that have a strong base currency and a somewhat weaker pair. In some cases, currency pairs may show a sideways trend, instead of either an upward or downward trend. Whilst this lack of movement may mean you automatically disregard the pair, a sideways trend can give an insight into the pair’s performance and should not, therefore, necessarily be immediately disregarded.
Choose Your Trading Strategy
Many people who trade on the Forex market do so using a trading strategy. Although many people claim that using a trading strategy makes it easier to make a profit, this isn’t guaranteed. If you do choose to use a trading strategy, however, you’ll want to ensure that the currency pair you choose to trade in matches the strategy you’re using.
There are trading strategies which are known as trending trading strategies, for example. These are designed to be used when you’re trading in a currency pair that is trending. Similarly, sideways market and range trading strategies are designed for use when you’re trading a currency pair that has a sideways trend.
Start Trading in Forex Now
The most successful FX traders typically spend a lot of time learning about the markets, strategies, trading tools and expert analysis before they make a trade. This type of research can help you to learn everything you need to know about Forex trading and will help you to choose the right currency pair when you decide to play the FX market.
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