The Currencies to Trade to Make Money
There is a huge number of ‘foreign currency pairs’ you can trade. In fact, the whole system of Forex trading has been set up so that businesses in any recognised country can exchange their currency for another currency. It is all about international trade and making that practical.
With such an array of possible trades, it might seem difficult to choose which currencies to trade. In fact, you will get best results by trading the major currencies, because you want the maximum liquidity, which means that you can fill your trade easily.
When you decide to sell the pound against the US$ you are trading the GBPUSD currency pair. Not all currency pairs are created equal, and in addition to doing better trading the major currencies than the minor, exotic ones, there are some major currency pairs that are better than others. The main currency pairs are:
EURUSD
GBPUSD
USDCHF (Swiss Franc)
USDJPY
USDCAD (Canadian Dollar)
AUDUSD (Australian Dollar)
At certain times, each foreign currency pair races off to make a series of good trades, but day in, day out, the GBPUSD is the best currency pair to trade. This is because there is plenty of movement each day, despite the fact that the EURUSD accounts for the largest amount of currency traded.
What you want is a foreign currency pair that has a large average daily movement, and generally the GBPUSD has about 20 per cent more pips in the range traded each day than the EURUSD.
If you are trading from the USA or Canada, you will do well to trade the USDCAD because virtually all the trading is done during the New York session.
Other currency pairs that can be profitable are:
GBPJPY
EURJPY
CADJPY
AUDCHF
London is still the forex trading centre of the world, now backed up by Frankfurt, Germany, in almost the same time zone. All the big international banks maintain offices for forex trading in London, whether their head office is in New York, London, Paris, Frankfurt, Los Angeles, Tokyo or Toronto. If you are in Europe, then the GBPUSD and EURUSD and EURJPY are good currency pairs to trade.
How many should you trade? To start with, trade no more than two pairs, and until you are very experienced it is best to stick to three or four pairs. Also, it is a good idea to stick with currencies of the countries that are in a similar time zone to you. In Asia, this would be the USDJPY and AUDUSD, for example.
However, you need to look carefully if you want to trade minor currencies or cross trades. For example, the ‘spread’ between the buy and sell price for the EURJPY can be 5 pips, and for some of the lesser currencies – lesser in trading volume – the spread can go up to 8 or 10 pips, which mean you need to make 20 pips for a small 10 pips profit. So be careful with minor currency pairs.