If you open a trading account with a forex broker and start using their trading platform, you may well find that there are over 100 different currency pairs that you can trade.
This can be quite overwhelming when you first start trading the markets, but to be honest, you will probably never trade most of these because most people tend to stick to the major currency pairs and ignore most of the exotic ones.
You will generally find that the major forex pairs are generally the most profitable because the price moves that occur around fibonacci levels and key support and resistance levels, for example, are more predictable and reliable.
Plus these tend to have the tightest spreads, which is an important consideration because the higher spreads on some of the more exotic pairs can really eat into your profits.
So I would always suggest that you stick to the major forex pairs if you are new to currency trading, which include the following:
- AUD/USD
- EUR/GBP
- EUR/JPY
- EUR/USD
- GBP/JPY
- GBP/USD
- USD/CAD
- USD/CHF
- USD/JPY
If you wanted to, you could always narrow down your selection even further and just concentrate on two of three of these. For example, you could base your trading strategies around the GBP/USD, EUR/USD and USD/JPY, which are generally three of the most popular ones.
The fact is that some people find it easier to study the behaviour of one or two pairs and get to know them inside out so that they become easier to trade.
If you are unsure which ones to choose, you should consider trading those that are most volatile when you yourself are available to trade.
So for example, if you are an Australian trader, you may find it easier to trade the AUD/USD than the GBP/USD or EUR/USD during the daytime because this pair will be more volatile at this time due to the time difference.
Similarly, British and European traders should consider concentrating on the GBP and EUR pairs if they are trading during the day (European time).
If you don’t want to restrict yourself to a handful of currency pairs, there is one final approach that you can take and that’s to construct a trading strategy that appears to be profitable for all of them.
This is easier said than done of course, but if you can manage to do this, you can just wait for a suitable set-up to occur on any of the currency pairs and place your trades accordingly, regardless of which pair it is that meets your criteria.
The point I want to get across is that there is no right or wrong method because every profitable trader has their own way of doing things. Ultimately you just have to experiment until you find a method that is profitable for you.
Whilst the vast majority of people find that the major currency pairs are the most profitable ones to trade, and concentrate on two or three of these, some of the most talented traders will trade a wide variety of different pairs if they have a really profitable trading strategy in place that works for all of them.
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