Forex Currency Pairs Recommendation: What are the best forex currency pairs for beginners to trade?

The foreign exchange market is the largest and most liquid financial market in the world, with an average daily trading volume of US$6 trillion. But with more than 100 foreign exchange currency pairs available for trading globally, which is the right choice for beginners? Choosing the wrong foreign exchange currency pair can lead to poor trading conditions, increased risk and reduced profitability. In this article, we will list the ten most traded major currency pairs in the market to help you find the best forex currency pair for your personal trading style and preferences.

•   What is a foreign currency pair?
•   Description of Foreign Exchange Currency Pairs
•   What are the best currency pairs to trade in Forex?
•   Technical and Fundamental Analysis of Foreign Exchange Currency Pairs
•   How to choose the right currency pair for a newbie?
•   How to Reduce Forex Trading Risks: Diversification of Currency Pair Trading

 What is a foreign currency pair?

Understanding foreign exchange currency pairs is critical to successful trading because they provide the basis for all trades and determine the potential profit or loss of a trade. When trading forex, you are trading currencies in pairs. To be able to trade currencies effectively, you need information about the value of each currency in the pair relative to each other. This relationship defines a currency pair. A currency pair consists of two currency abbreviations followed by the value of the “base” currency (the first listed) expressed in the “quote” currency (the second listed). There is always an international code that specifies the setting of the currency pair. For example, EURUSD quoted at 1.23 means that one euro is worth 1.23 dollars. Here, the base currency is the Euro (EUR) and the counter currency is the US Dollar. The quote is constantly fluctuating according to market conditions, so traders must be aware of the situation and make strategic decisions in a timely manner. It is worth mentioning here that in the active world of trading, people trade currencies through futures or forex markets. We have just introduced foreign exchange currency trading in the forex market, now we will briefly explain the difference between currency futures trading and forex trading by explaining currency futures. Forex futures are a way for people to exchange views on the economic strength of countries around the world. Forex futures represent the value of a foreign currency denominated in U.S. dollars at a specified point in time in the future. Unlike currency trading in the foreign exchange market, foreign exchange futures are priced in U.S. dollars per unit of foreign currency in a contract with a specified expiration date. In this article, we will focus on currency pair trading in the forex market.

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  Description of Foreign Exchange Currency Pairs

Forex trading offers a wide range of currency pairs, categorized by liquidity, volume, economic significance and geographic location. Understanding these categories is key to navigating the market. Major currency pairs such as EUR/USD and USD/JPY involve the world’s largest economies and are highly liquid. Secondary currency pairs such as EUR/AUD and GBP/CAD are paired with the currencies of smaller economies other than the US dollar, providing niche trading opportunities. Exotic currency pairs such as USD/Turkish Lira and EUR/SGD bridge the gap between major and emerging markets, offering unique risk and reward. Exploring these categories can refine your trading strategy and capitalize on market trends. Here, we’ll take a closer look at these three different currency pair types.

 Major currencies in foreign exchange transactions

There is no definitive list of major currency pairs, but when people talk about major currency pairs, they are usually referring to the most actively traded and therefore most liquid ones, which include:

 EUR/USD (Euro against the U.S. Dollar)

 USD/JPY (U.S. Dollar vs. Japanese Yen)

 GBP/USD (Pound Sterling to US Dollar)

 AUD/USD (Australian Dollar against the US Dollar)

 USD/CHF (United States dollar against the Swiss franc)

 USD/CAD (United States dollars against Canadian dollars)

The value of these major currencies fluctuates as the volume of trade between the two countries changes by the minute. These pairs are naturally associated with countries with greater financial strength and greater global trade volumes. Generally speaking, these are the most volatile currency pairs, which means that the largest price fluctuations are likely to occur during the course of the day. Does this mean they are the best pairs to trade against? Not necessarily, as traders can lose or make money due to volatility. The most traded currency pairs tend to have the best trading conditions as they tend to have lower spreads, but this does not necessarily mean that the major currency pairs are the most suitable pairs for every trader.

Secondary Currencies in Forex Trading Secondary currency pairs, also known as cross currency pairs, are currency pairs that do not contain the U.S. dollar. These pairs have wider spreads and less liquidity than major currency pairs, but they are still liquid enough to trade. These currency pairs include:

 EUR/GBP (Euro to Pound Sterling)

 GBP/JPY (Pound Sterling to Japanese Yen)

 EUR/CHF (euro against the Swiss franc)

 Exotic Currencies in Foreign Exchange Transactions

Finally, there are exotic currency pairs, which include the currencies of emerging economies. Exotic pairs are the least liquid, but also tend to have the largest spreads. These pairs include:

 USD/CLP (United States dollar/Chilean peso)

 EUR/RUB (euro/russian ruble)

 GBP/SGD (Pound Sterling/SGD)

 USD/TRY (United States dollar/Turkish lira)

 USD/ZAR (United States dollar/ZAR)

  What are the best currency pairs to trade in Forex?

You can find a wide range of currency pairs to trade in over 200 countries around the world. However, these may not provide the best results. So what are the best currency pairs to trade? What do most traders trade? Which ones are worth trading and why?

Before analyzing the best pairs, it is best to enhance our understanding of the most traded currency pairs in the forex trading world. They include:

 United States dollar (USD)

 Euro (EUR)

 Australian Dollar (AUD)

 Swiss franc (CHF)

 Canadian dollar (CAD)

 Japanese Yen (JPY)

 Pound Sterling (GBP)

Among these currencies, you can find some popular currency pairs. If you want to succeed in forex trading, you need to have an in-depth understanding of the different forex pairs used for trading.

 1. EUR/USD

EUR/USD this can be considered as the most popular forex currency pair. In addition, it has the lowest spreads among modern world forex brokers. It is associated with basic technical analysis. The best thing about EUR/USD is that it is not too volatile. Therefore, if you are a trader who doesn’t like to take too much risk, this could be one of the best options for you to trade forex. The EUR/USD exchange rate is determined by a number of factors, the most important of which is the interest rate set by the European Central Bank (ECB) and the Federal Reserve Board (Fed). This is because currencies with higher interest rates are usually in higher demand, as higher interest rates provide a better return on their initial investment. For example, if the ECB sets a higher interest rate than the Fed, the Euro may appreciate against the US Dollar. Given its popularity, you can find plenty of information about EUR/USD online that can help you avoid making avoidable mistakes.

 2. GBP/USD

The GBP/USD profit point and the potential for a significant uptick have contributed greatly to the popularity of GBP/USD. The GBP/USD quote is influenced by the interest rates set by the Bank of England (BoE) and the Federal Reserve Board. The subsequent difference in interest rates between Sterling and the US Dollar can have a significant impact on the price of the GBP/USD pair. However, you need to remember that higher profits come with greater risk. This is a currency pair that can be categorized as volatile. However, many forex traders prefer to choose it as their favorite trade as they can find plenty of market analysis information on the internet to help them.

 3. USD/JPY

USD/JPY is another popular currency pair commonly seen in the forex trading world. Similar to EUR/USD, USD/JPY is known for its high liquidity, as the Japanese Yen is the most traded currency in Asia and the US Dollar is the most traded currency in the world. Similar to the Federal Reserve and the European Central Bank, the Bank of Japan (BoJ) sets interest rates for the Japanese economy, which in turn affects the value of the yen relative to the dollar. USD/JPY is also associated with low spreads and you can usually follow a smooth trend compared to other currency pairs. It also has the potential to offer traders exciting profit opportunities.

4.AUD/USD The AUD/USD accounted for 5.4 % of daily foreign exchange transactions in 2019. Much like the previously mentioned currency pairs, the AUD/USD exchange rate is affected by the spread between the Reserve Bank of Australia (RBA) and the Federal Reserve. For example, if U.S. interest rates are lower, the U.S. dollar may weaken against the Australian dollar, costing more U.S. dollars to buy one Australian dollar.

 5. USD/CAD

In 2019, USD/CAD trading accounted for 4.4% of daily FX trading volume. The strength of the Canadian dollar is closely linked to the price of oil, as oil is Canada’s main export. Since oil is priced in U.S. dollars on the world market, Canada can earn a lot of dollars from oil exports. Therefore, if the price of oil rises, the value of the Canadian dollar may strengthen relative to the U.S. dollar. Generally speaking, when the price of oil rises, the U.S. dollar usually depreciates because if the dollar depreciates, more U.S. dollars must be exchanged for other currencies in order to buy the same amount of oil as before. Conversely, because of the close LINK between the Canadian dollar and the price of oil, expensive oil means that the Canadian dollar is likely to strengthen. Therefore, traders should keep an eye on the price of Brent Crude and U.S. Crude when trading USD/CAD, as any fluctuations in the oil market could have an impact on the exchange rate of the currency pair.

 6. USD/RMB

USD/RMB accounted for 4.1% of daily FX trading volume in 2019 . Since the outbreak of the US-China trade war, the RMB/USD exchange rate has fallen sharply. This is partly due to the Chinese government devaluing the RMB, knowing that this will make Chinese exports cheaper and increase its already significant market share in countries outside of the US. Traders should keep a close eye on the trade war between the US and China, as any developments could affect the price of the currency pair.

 7. USD/CHF

The USD/CHF is a popular currency pair because the Swiss financial system has historically been a SAFE haven for investors and their capital. As a result, during periods of heightened market volatility, traders usually turn to the Swiss franc, but during periods of market stability, traders’ interest in the Swiss franc usually diminishes. During periods of heightened volatility, the price of the currency pair may fall as the Swiss franc strengthens against the U.S. dollar following increased investment. The Swiss franc is not as actively traded as the previous six currency pairs on this list, as it is primarily redirected during periods of economic volatility or as a safe haven. However, USD/CHF still accounts for 3.6% of all daily FX trades in 2019.

 8. USD/HKD

USD/HKD is the exchange rate of the Hong Kong Dollar against the US Dollar. Between 2016 and 2019, the volume of trading in this currency pair more than doubled, from 1.5% to 3.3% of total daily foreign exchange transactions. The value of the Hong Kong dollar is pegged to the US dollar through a unique system called the Linked Exchange Rate. The Hong Kong dollar is allowed to fluctuate within a range of HK$7.75 to HK$7.85 per US dollar, and traders can take advantage of any price movement within that range.

 9. Euro/pound sterling

The EUR/GBP currency pair of the Euro and the Pound Sterling is often regarded as one of the most difficult currency pairs to make accurate price Predictions for. This is because the EUR and GBP have been historically linked given the UK’s proximity to Europe and the subsequent strong trade links between the two economies. Despite the difficulty in predicting their movements, EUR/GBP still accounts for 2.0% of daily trading volume in 2019, making it the ninth most traded currency pair on our list. As with the other currency pairs on this list, traders should keep an eye out for any announcements from the ECB and BoE that could affect the EUR and GBP exchange rates, which will add further volatility.

10. USD/KRW USD/KRW accounted for 1.9% of daily foreign exchange transactions in 2019. Korea’s economic growth has been impressive, especially since the end of the Korean War in 1953, often referred to as the miracle of the Han River. This growth is now being capitalized on, with Korea being a member of the United Nations, the Organization for Economic Cooperation and Development (OECD) and the G20, making the country and its currency an exciting opportunity for many market participants.

These major currency pairs are unique in their excellent liquidity, which ensures tight spreads and smooth trade execution. This high level of liquidity attracts traders at all levels, from retail investors to institutional investors, who appreciate the ample trading opportunities they offer. However, successfully navigating these markets requires a thorough understanding of the factors that drive the trends in each currency pair. In order to make informed decisions, traders must stay abreast of economic news, central bank announcements, and geopolitical developments that may affect the value of these currencies. Conducting both fundamental and technical analysis is essential to identifying trends, support and resistance levels, and potential breakouts. By doing so, traders can capitalize on market movements and reduce risk.

In addition, all of the major forex dealers that can be found have small spreads. However, due to their volatility, this does not really apply to GBPUSD. It is probably best to avoid currency pairs with high spreads. The spreads recommended by trading experts tend to be around 0-3 pips. At more than 6 pips, trades can become too expensive and lead to bigger losses. However, this does not mean that you should avoid anything with high spreads altogether. In this regard, the best way to trade wisely and effectively is to have proper risk management in your trading to help minimize trading risk.

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  Technical and Fundamental Analysis of Foreign Exchange Currency Pairs

Like any other skill, success in trading takes time and a lot of practice. Successful trading starts with developing a trading plan based on technical or fundamental analysis so that you can find the best forex currency pairs to trade.

 1. Utilize technical analysis to understand market trends

As mentioned earlier, every forex trade involves buying one currency and selling another. Therefore, choosing the right trend direction is crucial to winning trades. Technical analysis focuses on the price charts of financial instruments, using technical indicators or price behavior to try to predict future price movements. Many of the best traders practice some form of technical analysis and chart reading.

 2. Conducting fundamental analysis

Quoted prices for foreign currency pairs may vary depending on prevailing market conditions. Fundamental analysis involves predicting price movements based on macroeconomic data and news releases. For example, safe-haven currencies such as the U.S. Dollar and Japanese Yen tend to perform well in times of economic uncertainty, while commodity currencies such as the Australian Dollar and Canadian Dollar tend to perform well in times of economic growth. By understanding market conditions and choosing the best pairs, traders can increase their chances of success. However, with many organizations now offering Predictions and analysis, there are many different ways to learn about currency trading online. BTCC also provides analysis and Predictions for a wide range of forex currencies, and you can visit our Academy section to learn about different trading strategies that can help you trade currency pairs more easily.

  How to choose the right currency pair for a newbie?

After understanding the major forex currency pairs above, finally, we will help beginners to choose the right pair through a few steps:

 Step 1: Understanding Market Characteristics

Begin by delving into the nuances of the forex market. Identify currency pairs with high trading volumes and low spreads, as they offer scalping traders a greater opportunity to capitalize on small price fluctuations. Familiarize yourself with major and minor currency pairs, each of which has a unique pattern of movement and level of liquidity.

 Step 2: Analyze Market Trends and News

Keep abreast of global economic news and trends that may have a significant impact on currency movements. Monitor central bank policies, geopolitical events and economic data releases as they often trigger currency pair movements. Use this information to predict the direction of the market and select currency pairs that match your Predictions.

 Step 3: Research Associations

Understand the correlation between currency pairs. Highly correlated currency pairs tend to move in tandem, limiting potential profit opportunities for bulls. Look for lower correlation currency pairs to diversify your portfolio and capitalize on unique market trends.

 Step 4: Evaluate Technical Indicators

Use technical analysis tools and indicators to identify potential trading opportunities. Examine chart patterns, support and resistance levels, moving averages and other technical indicators to assess the strength and direction of currency pairs. This analysis can help you determine entry and exit points for scalping strategies.

 Step 5: Testing and Validation

Practice makes perfect. Use a demo account or small trades to test your chosen currency pairs. This step is important for traders, especially beginners, as it allows you to familiarize yourself with the trading platform, evaluate how the pair performs under different market conditions, and refine your trading strategy before committing real capital.

 Step 6: Adapting to Market Dynamics

Markets are dynamic and so should your approach. Continuously monitor your choice of foreign currency pairs and adapt to changing market conditions. Stay abreast of economic developments, news events and technical signals that may affect currency movements. Be flexible and ready to adjust your trading strategy based on new information and market dynamics.

 Step 7: Effective risk management

Risk management is the cornerstone of successful trading. Utilize effective risk management techniques to protect your capital and minimize potential losses. Set stop-loss orders, manage position sizes, diversify your portfolio and avoid over-leveraging. Consider the risk-reward ratio of each trade and make sure your risk exposure is within your tolerance. Remember, trading involves risk, and a systematic approach to research, analysis and risk management can help you stay focused and follow a predetermined trading style.

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 How to Reduce Forex Trading Risks: Diversification of Currency Pair Trading

Portfolio diversification is the key to effectively controlling risk and increasing returns for forex traders. Traders can reduce their risk exposure and increase their chances of success by trading a variety of currency pairs. When deciding which currency pairs to trade, it is important to consider market volatility and spreads. Traders can diversify their portfolios and minimize the consequences of market volatility by understanding the correlation between various currency pairs. While negative correlations may help mitigate potential losses, positive correlations allow traders to profit from upward trends in various currencies. However, the relationship between currency pairs should be monitored and reassessed frequently, as it can change over time.