The most popular currency pair in the world is the EUR/USD, as it is the most widely used due to its stability. Although there are many currency pairs in the Forex market to trade, the most recommended currency pairs for beginners is the EUR/USD.
About 70% of all trades made in the Forex market worldwide are made with the currency pair EUR/USD. Therefore, these are the two most important currencies circulating in the world today. This pair is not only used for trading by retail traders, but also by large institutions, banks, international companies, among others.
The Best Currency Pairs to Trade for Beginners
The recommended currency pairs for anyone starting out should be those with high liquidity, and a high rate of trading, such as EUR/USD. There are some reasons for this:
Pairs like the EUR/USD and GBP/USD, have the peculiarity of not being volatile. So the risks involved in trading them are really very low. Trading these pairs gives us the opportunity to set the stop loss very close to our entry point, unlike pairs that can have more unpredictable movements and where you run more risk by having to adjust the stop loss not so close.
The main pairs or more important, usually have a behavior that can be predicted more easily because they have a direct link to the great economies of the world. It is possible to have a better knowledge and forecast of this type of pairs that of others with more discreet economies of which it is more difficult to be kept up to date.
The recommended thing for a beginner trader is to make a fundamental analysis, this means, to be aware of the news and any political situation that can serve to predict the movements that can have a pair of currencies in the medium and long term. Besides, as you gain experience you can also start doing a deeper analysis, for example, price comparison charts of a certain pair you want to trade, this is really useful to forecast the price changes in the short term, like in days, hours, or just a few minutes.
Other reason is that they have low spreads because they have a higher trading volume. The spread is the difference between the buy and sell value that the brokers have, in short, it is the commission. Pairs like EUR/USD usually have a very low spread, sometimes as low as 1 pip. However, in other less common types of pairs the spreads are very high, reaching 15 or more pips.
Every time we start a trade, we start out negative because we have to take into account the spread, so it’s easier to make a profit with a low negative of 1 or 2 pips than with a high pair that has a high spread of more than 15 pips. In addition to this, you should also consider how unpredictable and abrupt less common pairs can be, so they are not recommended for beginner traders as they represent more risk.
Considerations when trading Forex
- Many traders tend to fully study a single specific currency pair that they get to know very well. Obviously these types of decisions are very personal, although I really recommend not to limit yourself to working with only one currency pair and not to be concerned about the opportunities that other currencies may offer. The main objective is to achieve the trading system that is most effective and profitable for you. To be able to discover those configurations that can be strong and to be able to discard those that are not and that can generate an unnecessary risk to you.
- You must be very careful, because anxiety is often your own enemy, and make you see strong settings and that are not, and open positions with which you will not get any benefit. This leads to the fact that if you rush to open impulsively, you will quickly lose your entire account balance. It is advisable to put your emotions aside and open those positions following your trading system.
- You should analyze well what time is best for trading. Therefore, there are situations during the day in which there will be a greater flow of trading and, as a consequence, more volatility. As it is the case in which the flow of business is lower and less recommendable.
Every time we trade Forex we take risks, and for a beginner to be successful in the medium or long term they should try to take as little risk as possible, and the EUR/USD and GBP/USD are the most recommended options to achieve it.