Theoretically at least, a trader can deal in any pair: that is, any two of the 150 or so currencies of the world. Almost all countries have their own currency except for the European countries who are part of the euro system and a few small nations who use the US dollar. There are other countries whose currencies are pegged to the dollar to give them some economic stability. Still, there are a lot of currencies out there, and in combination that makes a huge number of forex pairs.

In practice of course there are limits on the currency pairs that an individual trader can access. Most brokers will only let you deal with certain pairs, or if they quote prices on unusual pairs then the spread will be high so you have a higher threshold to beat before you start making money. If you want to trade in a minor currency it is often best to do so through a broker who is based in that country.

However, for most traders this is not even an issue. The average forex retail trader (that is, somebody trading on their own account, often from home) would not touch most minor currencies because they are too volatile. For anybody starting out, certainly the best option is to stick with the major currencies.

So which forex currencies would be described as major? There can be some debate about this but most sources count 7 major currencies in order of their traded volume. They are: US dollar USD, euro EUR, Japanese yen JPY, British pound GBP, Swiss franc CHF, Canadian dollar CAD and Australian dollar AUD.

Major pairs are defined as pairs of the US dollar with any other major currency. This creates 6 major pairs which are EUR/USD, USD/JPY, GBP/USD, USD/CHF, USD/CAD and AUD/USD. Pairs of two major currencies where neither one is the US dollar are called cross pairs. This gives another 30 possible pairs. An example would be GBP/CHF.

The most heavily traded pair of forex currencies is EUR/USD. The high liquidity of EUR/USD has three main advantages. First, you will not have trouble getting matched including having stop losses matched at the planned point without a lot of slippage. Second, the spread tends to be low because competition between brokers is intense for this pair. Third, there is a ton of forex news relating to these two currencies and you are much less likely to miss some important announcement.

With all of these factors coming into play, the recommendation for beginners is to keep to one pair and make it the biggest, EUR/USD. That is if you are trading for yourself. If you are using a robot, it may be set up for other forex currencies and you should go with the recommended pairs.

Forex Currencies: The Best Pairs? is a post from: Great Forex World

1. Liquidity

For a beginner learning to trade on the live markets or with a demo account, the best forex currencies to get involved with are the ones that have highest liquidity. That means the pairs on which most money is traded each day.

There are several reasons for this. One is that the high liquidity means that it is almost certain to get a trade matched. So if you place a stop, for example, it is more likely to be triggered at the exact point that you set, without any slippage. Of course, this depends on your broker too.

The second big reason for choosing the most active currency pairs for your trading is that usually they will have a lower spread. This is the broker’s profit. A lot of activity in the market naturally creates a narrow spread. At the same time, competition for trades in the most popular pairs is intense between the brokers, so you can take advantage of that by choosing those pairs.

So which are the most heavily traded pairs in the currency forex market? Of course they all involve the US dollar, which is the biggest traded currency in this great forex world. Second is the euro, so the top forex currency pair is EUR/USD. After that comes the Japanese Yen in the pair USD/JPY, and then GBP/USD, the British pound against the Dollar. Interestingly the GBP/USD is known as cable because in the early days of fx trading telegrams or cables were used to pass instructions to your trading broker.

2. Systems

There is a second very important factor to take into account when considering which currency pair to trade, and that is the system that you are using. Many systems are designed for particular pairs and will not necessarily work for other pairs. This might seem strange until you realize that the economic factors affecting the world’s nations vary from country to country. For example, some countries are heavily dependent upon one particular export or trade. This means that their currency will behave differently from others because it is linked to the price of one commodity or the conditions required for something like tourism, manufacturing or agriculture will have to be favorable for the currency to perform well.

You can of course invest in an automated forex trading system or robot, and these are usually designed to work with specific currency pairs. For example FAP Turbo works with two cross pairs, not involving the US dollar. You could not set that robot to make money with any pair that you chose. In fact the robot is no different from any other system that you might find in the market except that it is automated. If you choose a forex robot the manual will explain which are the best currency pairs to use that robot in the currency forex market and how to set the parameters for each of these.

Currency Forex Market : Currency Pairs is a post from: Great Forex World