Choosing the best currency pairs to trade in the Forex market can be challenging. Investors often analyse the currency’s strength before making a decision. A strong currency has the potential for appreciation, thus opening doors to attractive returns. Also, investors must consider the liquidity of the currency pair before making a decision. Read on to know the best Forex pairs to trade for beginners in the market.
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What Makes the Best Forex Pair to Trade?
Investors find the best currency pairs based on several factors. These factors are liquidity, volatility (pip movement), and trading hours. Let us discuss these factors and their impact on currency pairs in brief:
Liquidity
The Forex market is known for its high liquidity, thus ensuring quick and easy transactions. One can find trade currency pairs easily due to high liquidity. However, not all currency pairs are highly liquid in the Forex market. There are around 180 currencies available in the Forex market. However, the top seven currency pairs make up around 75% of the trading volume in the Forex market. Traders must know the highly liquid currency pairs before investing.
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Time of Day
Volatility or price movement in the Forex market is evaluated in the form of pips. Pips are the last decimal places in the quoted rate of a given currency. Long-term traders might prefer stable currencies with fewer pip movements. On the other hand, short-term or day traders might prefer highly volatile currencies to benefit from price movements.
The Forex market is divided into peak activity sessions, like Tokyo, London, and New York. The timing for each session in the Forex market is different. Here is the average pip movement for different sessions:
| Session | Tokyo | London | New York |
| Average Pip Movement | 39 | 61 | 36 |
As one can see, the New York session shows the most pip movement. For the same rationale, investors prefer to trade between 08:00 and 16:00 GMT, which are the timings of the London session. Also, you can trade at the time when two sessions overlap for better results.
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What are the Best Forex Pairs to Trade?
Forex trading in India is gaining popularity quickly. Beginners in the Forex market must be familiar with the best currency pairs. Here are the most traded currency pairs in the Forex market:
EUR/USD
EUR/USD (nicknamed fibre) has the highest trading volume among all currency pairs in the Forex market. Traders can invest in the largest economies with this pair, the American and European economies. This currency pair is influenced by the changes in the value of the Dollar and Euro. Political events, industrial developments, and other factors in the United States and the European region impact this currency pair.
USD/JPY
Besides the Dollar, Yen (Japan’s currency) is among the most powerful ones. The USD/JPY pair has a high trading volume and a low spread. The minimum spread for the USD/JPY pair is 0.005 points. Traders tend to pay fewer brokerage charges due to the low spread. Also, the Central Bank of Japan takes extra measures to keep the exchange rate under control. It allows traders to benefit from the USD/JPY pair in the Forex market.
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GBP/USD
The GBP/USD pair (nicknamed cable) was the strongest in the world at one time. However, the 2008 financial crisis, Brexit (2020), and other events led to its decline. The currency pair experienced significant fluctuations when the UK left the EU (European Union) in 2020. However, it is still among the top three currency pairs in the world, with a minimum spread of 0.0008 points.
USD/CNY
The USD/CNY pair is among the most traded pairs in Forex. Besides the Dollar, the Chinese currency (Yuan) is among the fastest-growing ones in the world. Since the USA and China are the largest exporters in the world, their economies grow at a significant rate. The minimum spread for the USD/CNY pair is 0.0007 points.
USD/CAD
The USD/CAD shows the relationship between the US Dollar and the Canadian Dollar. These neighbouring economies (USA and Canada) are also prominent trading partners. The value of the USD/CAD currency pair depends heavily on oil prices, as both countries are actively involved in oil exports.
AUD/USD
The Australian Dollar is among the fastest-growing currencies in the world. Investors often prefer the AUD currency due to its dependence on commodities. Investors can gain exposure to the commodities market without the need for trading derivatives. The minimum spread for the AUD/USD pair is 0.00023 points.
USD/CHF
This currency pair involves the US Dollar and the Swiss Franc (CHF). The Swiss financial system has always been lauded by economists and traders. The chances of appreciation are higher with the Swiss Franc even when other currencies lose value. However, the CHF might lose value when other currencies are showing stable growth. Investors also pay less brokerage by trading the USD/CHF pair, as the minimum spread is around 0.0001 points.
USD/HKD
Even though Hong Kong is not one of the major economies, it shows great signs for the future. The USD/HKD is considered an exotic pair in the Forex market. It is among the best Forex pairs to trade and already accounts for around 2.4% of the total daily trading volume in the Forex market. It is crucial to note that the Hong Kong Dollar can only fluctuate against USD within a set band. It happens because HKD is pegged to the USD (a case of a linked exchange rate).
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SGD/USD
Singapore is a highly developed nation and a financial hub in Asia. The SGD/USD pair can help invest in two of the strongest economies in the world. However, investors must keep a tab on local events in Singapore, as they can impact the exchange rates.
EUR/GBP
The EUR/GBP is among the most traded currency pairs that do not involve USD. However, it is considered a minor currency pair for the same reason. Also, one might find it difficult to predict the exchange rates for this pair. Since the fluctuations have risen after Brexit, it can be hard to predict the changes in the EUR/GBP pair.
| Currency Pair | Description | Minimum Spread |
| EUR/USD | Highest trading volume. Influenced by Dollar and Euro. | 0.00001 |
| USD/JPY | High volume, low spread. Central Bank of Japan intervenes. | 0.005 |
| GBP/USD | Top three pair, Brexit impacted. Significant trading volume. | 0.0008 |
| USD/CNY | Among most traded. Chinese Yuan growth. Minimum spread 0.0007. | 0.0007 |
| AUD/USD | Fast-growing Australian Dollar. Preferred for commodity exposure. Minimum spread 0.00023. | 0.00023 |
| USD/CHF | Involves US Dollar and Swiss Franc. Lower spread. Minimum spread 0.0001. | 0.0001 |
| USD/HKD | Pegged to USD. Exotic pair, potential for growth. | – |
| SGD/USD | Strong economies, Singapore events impact rates. | – |
| EUR/GBP | Top non-USD pair. Brexit affects predictability. | – |
Conclusion
Are you willing to start trading in the Forex (FX) market? If yes, you must be familiar with the most traded currency pairs. You must choose currency pairs with high liquidity or trading volume. Also, don’t forget to check the average spread of a currency pair before making a decision. Start trading currency pairs right away!
Don’t miss out on lucrative trades! Get started with the best currency pairs for beginners and open an online demat account hassle-free!
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