If you are thinking about trading in the forex market, then the most crucial thing that you will need is the right currency pair. That is because if you don’t invest in the right pair, then what was the point of investing in forex. However, if you don’t know how to choose the right currency pair for forex trading, then you should follow my guidelines.
Important Tips for choosing the Right Currency Pair for Forex Trading
These are the tips that you must follow to choose the best currency pair for forex trading:
Major, Minor, and Exotics
Currency pairs can be classified into three categories: major, minor, and exotics. You must have to choose the one that suits your trading style and need.
Major – These are the currency pairs that are traded most frequently. For example, EUR/USD (Euro / US dollar), USD/JPY (US dollar / Japanese Yen), GBP/USD (British pound / US dollar).
Minor – Minor currency pairs don’t include US dollars, but still, these currency pairs are widely used. For example, EUR/GBP (Euro / British pound), EUR/AUD (Euro / Australian dollar), GBP/ JPY (British pound / Japanese Yen).
Exotics – It includes a major currency and a currency of the developing country. For example, EUR/TRY (Euro / Turkish lira), USD/HKD (US dollar / Hong Kong dollar), and JPY/NOK (Japanese yen / Norwegian Krone).
Use the Trend
It is important for a trader to identify the forex trends so that he or she can determine which currency pair is best for him or her. Now, the currency pair trend will help you to see which currency pair is in downwards and upwards and also will give many insights that can be used to choose your pair. You can also take note of the past trends and predict what will happen to a certain currency pair.
Combine Trend with Strategy
You have monitored the trends and have all insights that you will need to see which currency pair is good for your style. Now, it is time to make a good strategy and combine that strategy with the trend. The motive here is to see which currency pair is most suitable for your strategy. So, the trend will help you. However, you have to make sure that the currency pair you are choosing has great potential and fits your strategy. Otherwise, you must go for another pair.
ATR stands for Average True Range. It is an amount that is the movement of pips in a single day. You must know the ATR of the currency before choosing the currency pair. That is because if you don’t have any idea about how much the price will change in a single day, then you are going to suffer a huge loss in the future. That’s why you should consider the ATR while choosing the right currency pair for forex trading.
These tips will help you to choose the right currency pair for forex trading. But, make sure to research and follow the trends properly.