What Are The Best Currency Pairs To Trade? A common question and one which is much argued about by new and even seasoned traders across many Forex Trading forums all over the world. Many traders will give many different reasons as to why they prefer trading a specific instrument rather than another and in some instances there will be no arguing with them. There is however a logical approach to this question and when applied a Short list and then a Definitive list of the best Currency pairs to trade can be constructed.
As a starting point it is worth looking at which currencies are traded more than others. Below are the Top 7 most traded currencies (source - therichest.org):
- USD - The US Dollar is involved in 85% of all currency transactions
- EUR - The Euro - 39%
- JPY - The Japanese Yen - 19%
- GBP - The Great British Pound - 13%
- AUD - The Australian Dollar - 8%
- CHF - The Swiss Franc - 6%
- CAD - The Canadian Dollar - 5%
All other currencies are involved in less than 2.5% of all currency transactions so they can be excluded from the selection process.
One of the main reasons traders trade the Forex market is because of the tight (Low) spreads. These Low spreads exist only for the most liquid (traded) instruments. It is logical therefore only to consider the most liquid instruments (those with Low spreads) for the Short list, as follows:
- EUR / USD
- USD / JPY
- GBP / USD
- AUD / USD
- USD / CHF
- USD / CAD
- EUR / JPY
- EUR / GBP
The spread on all of the above Currency pairs, with any Forex broker with any kind of reasonable reputation, is 3 PIPs or less.
Now, although highly liquid (and with Low spreads) not all of these Currency pairs move a lot each trading day. It is rare for any Currency pair to move more than 1% on any given day but somewhere around 0.5%+ can be expected on some of the most liquid ones.
Only (generally speaking) EUR / USD, GBP / USD and EUR / JPY move around 100+ PIPs each day (0.5%+) and this is the reason why they make up the Definitive list:
- EUR / USD
- GBP / USD
- EUR / JPY
These 3 Currency pairs have the following characteristics:
- HIGHLY traded (liquid) and because of this they have
- LOW spreads
- Move around 100+ PIPs (0.5%+) each day
And, that is why there are, logically, the Best Forex Currency Pairs To Trade.
