Contrary to popular belief, choosing the best currency pairs to trade as a beginner is never a simple task. A large percentage of newbies jump unto any pair that crosses their minds only to realize that choosing the best currency pair to trade as a beginner calls for a bit of homework.
A currency pair is a quotation that includes two distinct currencies (base and quote), with the value of one currency valued against the other. Trading in the Forex market is quite challenging, as proven by the fact that most beginners lose significant amounts or all of their investments. The main factors to consider when choosing the best currency pairs include volatility, spread, strategy, and trading objectives. It is a fact that with proper education, discipline, and experience, one can gather commendable success trading currency pairs.
Without further ado, let’s get to know the three groups of currency pairs in the Forex market.
Major Currency Pairs
Top traded FOREX pairs, otherwise known as major currency pairs, includes the US dollar and an economically developed country’s currency.
The seven major currencies and their codes are:
- The euro and US dollar: EUR/USD.
- The US dollar and Japanese yen: USD/JPY.
- The Australian dollar and US dollar: AUD/USD.
- The US dollar and Canadian dollar: USD/CAD.
- The New Zealand dollar and US dollar: NZD/USD.
- The British pound sterling and US dollar: GBP/USD.
- The US dollar and Swiss franc: USD/CHF.
These pairs accumulate the highest trading volume in the Forex market and represent some of the world’s largest economies. They are popular among pro traders and beginners due to volumes, smaller spreads, and reliability.
Minor or Cross Currency Pairs
These are currency pairs that do not have the US dollar on either of the sides. However, they include at least one of the world’s other three major currencies, including the Japanese yen, Euro, and British pounds.
Here are nine examples of a cross or minor currency pairs:
- EUR/CAD – Euro and Canadian dollar
- CHF/JPY – Swiss franc and Japanese yen
- EUR/GBP – Euro and the British pound
- CAD/JPY – Canadian dollar and Japanese yen
- AUD/JPY – Australian dollar and Japanese yen
- NZD/JPY – New Zealand dollar and Japanese yen
- GBP/CHF – British pound and Swiss franc
- GBP/CAD – British pound and Canadian dollar
- GBP/AUD – British pound and Australian dollar
The Japanese yen, British pound, US dollar, and the Euro make four of the world’s major currencies.
Exotic Currency Pairs
An exotic currency pair is any pair that includes the US dollar and the currency of any developing country. Examples are:
- USD/HKD US Dollar and Hong Kong Dollar.
- USD/SEK US Dollar and Swedish Krona.
- USD/SGD US Dollar and Singapore Dollar.
- USD/ZAR US Dollar and South African Rand
If you are looking for the best currency pairs to trade as a beginner, you’d want to steer clear of exotic pairs as they come with low liquidity, high volatility, high spread, and risks.
Now that you have learned the types of currency pairs in the forex market let’s look at some of the best currency pairs to trade as a beginner.
The Euro/United States dollar currency pair, otherwise known as the fiber, is the most traded pair globally. It is the most preferred pair by top banks, funds, financial institutes, and retail traders. This pair has the highest liquidity with reasonably volatile and backed by a sound economic system.
The pair of the British pound and the US dollar, otherwise called the cable, is another perfect pair for beginners. It has a straight and robust movement and higher volatility than that of the fiber. The instrument produces profitable pips and detailed market analysis. However, beginners should be cautious of the high risk associated with the pair.
Gopher is the nickname for this pair characterized by stable trends over long periods. It flaunts low spreads with a highly predictable trend that other currencies. This pair offers exceptional and profitable opportunities for traders. It accounts for 17% of transactions on the Forex market, making it the second-highest liquid instrument in the Forex market.
The Swissie is a major currency pair, and it tends to negatively correlate with the GBP/USD and the EUR/USD pairs. Beginners will find this pair more predictable than other pairs in this list. However, the pair can be challenging for traders who trade using only technical analysis for their transactions. Given the Swiss economy’s strength, the franc tends to be a refuge for forex traders in times of political and economic uncertainty.
This pair got the loonie nickname due to the duck pictured on the one Canadian dollar coin. The oil prices in Canada is a significant influence of this pair. When Canada’s oil prices increase, the Canadian dollar appreciates, and the reverse happens when the oil prices plummet.
This pair is excellent for beginners due to it is predictability. It is the least volatile pair of all currency pairs. Traders should pay attention to influential factors, including recessions and economic crises, as they play a considerable role in the currencies’ value.
This pair, otherwise known as the beast, is one of the world’s most traded currency pairs. You may want to trade this pair for several reasons, including high volatility, risk tracking, and rich trading resources availability. If you trade the GBP/JPY, keep in mind that the correlation between the Japanese yen and energy pricing can significantly influence its value.
With roughly over $6.6 trillion on average traded every day, the Forex market remains the world’s largest financial market. Profitable opportunities characterize it; hence there are thousands of people venturing into the market daily.
Knowing the best currency pairs to trade as a beginner is key to success. Traders should consider the various factors affecting each currency pair before trading. An effective strategy and a good risk management profile are common elements of successful trading.
Last Updated: 1 Aug, 2022.