What are the best forex currency pairs for a trade? The appropriate answer is seldom general and you have to consider several factors before you make a choice.
The forex market is teeming with forex pairs that you can trade in. every economic zone has a currency that is available for exchange with other currencies from other economic zones. As such, there are lots of options with some pairs being more popular than others. In this industry, it’s critical that you choose an appropriate forex currency pair in order to realize profits and grow your investment in the long run.
Type of strategy and tools used
For you to choose a good forex currency pair, you need to consider your trading strategy. This means that if you are acquainted with using a reversal strategy, you will find that some pairs will give you better returns than when you are using a trending strategy. To illustrate, if the USDEUR is trending, this might be an appropriate option for a trend trader but it would definitely be unfit for range traders. This means that you have to select a combination that augers well with a market structure that dictates the strategy.
Nevertheless, pairs are seldom static and they constantly shift from trending, reversal, and range. As such, you have to keep tabs on the progress of the pairs and ensure they are in line with your strategy. If you follow this principle, you will soon notice that pairs that were lucrative in the past can become less rewarding after some time.
Some pairs are best suited to certain market indicators and tools. This implies that your best option will also be dependent on your tools and indicators. It is quite important that you understand your tools and indicators well and become proficient in its use. Nevertheless, you must know that it can be quite difficult to come across a tool that offers 100% efficiency. As such, your edge as a trader will only come from experience and knowledge of your tools. To increase your success rates, you can use several tools to identify a currency pair.
Trading in special forex currency pairs
As a rule of thumb, the best forex currency to select for a trade is definitely one that you have outstanding knowledge and you can constantly monitor the factors influencing the pair. Therefore, you can reap good returns if you traded in a currency from your home country. The only exception is that it has to be excluded from the current majors. At the same time, you need to ensure that your country’s currency has shown a good level of volatility for some time.
Basically, a deep understanding of the economic and political factors gives you sufficient knowledge that can be used to make the trades. As such, you might want to consider a pair that has your local currency. More often than not, local currencies are quoted against the USD and this means that gathering information about the USD is critical.