As many countries there are that have their own currency, there are currency pairs to trade. This does not mean you should start off studying the movements of the Guatemalan Quetzal. New traders need to stick to those currencies whose indicators and movements have been well documented.
The three major currency pairs are the EUR/USD, GBP/USD and USD/JPY. If you didn’t already notice, the US dollar is listed in each one. That’s because this it the most traded currency in the market, and the one that has been studied at length.
There are three very good reasons why you should stick with these three currency pairs:
• All of them are well established currency pairs that are traded widely. This type of liquidity guarantees that you are going to profit from price changes.
• They all have the US dollar, which means that the most amount of activity will be during the New York trading hours. This adds to the liquidity as this is typically when the highest amount of Forex trading is taking place.
• Since they are so popular, a new trader is going to find a wealth of Forex trading systems online that can help them in trading these pairs successfully.
Which Ones Should You Avoid?
Any currency that is considered to be exotic or uncommon should be avoided by new traders. In some instances the financial state of the country is too unstable to be able to read the charts properly. For others, there just is not enough information available to you. A new trader needs to use as many resources as possible before placing a trade. Unless you have some first hand knowledge of Guatemala and its future financial state, you should stay far away from trading the uncommon currencies.
Shane got such a positive response to his first guest blog post (below) that I wanted to keep his momentum going and give him space to give you a little peak into his world of Forex trading. Many of you have checked out his “Evil Genius Cheats” newsletter, but if you haven't I recommend you do so before he won't let any more free people in. Please enjoy the article, check out his “Evil Genius Cheats” newsletter, and let the comments FLY!!
Ask any trader what currencies they trade and 99% of them will mention the major pairs. The EURUSD, GBPUSD, USDJPY and a handful of others. These are very active, very liquid and perhaps out of habit, the most widely traded.
What about the “exotic” pairs? The Danish Krone (USDDKK), Singapore Dollar (USDSGD) and a host of other pairs, give ample opportunity for the professional trader to make money. Right away, the main argument will be about the spread to trade exotics. True, the spread is much higher than EURUSD but look at the pip cost below while trading 100k. It is not the standard $10/pip/$100k.
The risk and sheer volatility of the forex market can be enough to scare away new comers. As with anything a good education is essential to be successful. Today Mike from FxMadness.com is going to cover the basics of forex pairs. Be sure to check it out and comment with your own forex experiences.
For most people starting to trade Forex, this market is synonymous with the US Dollar. It can be bought and sold against just about any currency on earth, traders are familiar with the so called "majors". It really is no surprise. After all this handful of currency pairs are most popular, quoted and widely known. They are also available on all trading platforms and the first ones new market participants usually try their hands on. Continue reading "Trading Currency Crosses..."→