Before you start making real trades, it is important to know what you’re getting into. Trading forex has the potential to be exciting, entertaining, and even a profitable way to spend your free time. There are of course risks, especially when trading the more volatile currency pairs, and trading without due diligence can have disastrous consequences. Reducing the risk is the goal of every trader, and it starts by knowing which currency pair is right for you. As always with our Bull & Bear series, we took two opposing viewpoints on which currency pair is the easiest to forecast. After you’ve read both sides of the story, you’ll be in a better place to make up your own mind.
What is forex trading and how does it work?
The forex market is the global ecosystem that connects the economies of all the countries of the world through an exchange. Legal currencies are traded on a software platform called MetaTrader 4 (MT4). The currencies are displayed in MT4 in pairs, such as GBPUSD, USDJPY, and so on. The exchange rates between these currencies fluctuate constantly based on the supply and demand for each of the currencies that make up the pair. Thus, the pairs have different behaviours and nuances that traders should learn about.
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For instance, some pairs are more volatile than others, which directly affects the trader’s potential profit and trading style. Also, some pairs are driven by fundamentals, while others conform to the principles of technical analysis. Before revealing what the easiest pair to trade is, you should know that there are three major groups of forex currency pairs: majors, minors, and the exotic pairs.
Major currency pairs vs others
Each major pair comprises the US dollar and the currency of one of the larger developed economies in the world. Currently, there are seven majors: EURUSD, USDJPY, GBPUSD, USDCAD, USDCHF, AUDUSD, and NZDUSD.
The minors are cross pairs formed by the currencies of the same developed economies, except for the US dollar. Thus, we have currency pairs like EURGBP, CADJPY, or GBPCHF.
Finally, the exotic pairs comprise the US dollar or any other major on one side and the currency of an emerging economy or a developed but smaller economy on the other side. You can think about pairs like USDSEK, USDHKD or EURTRY.
As you can see, the range of trading pairs is broad, which might be challenging for beginners who are looking to find the best pair to trade. Let’s see what our two forex traders think.
EURUSD is the best pair to trade
Some traders clearly favour the EURUSD as the best and easiest pair to trade for both novice and seasoned investors. And you know what? They have strong arguments to support their opinions.
EURUSD is unique in the way that it is made up of the two largest economies in the world. On the one hand, we have the US dollar – the world’s reserve currency, and by far the most traded currency globally. On the other hand, we have the euro, which is the common currency of the European Union (EU), and which also comes in as the second most traded currency in the world.
The pair is famous for following clear trends, which is ideal for long-term traders who open orders for days or even weeks. In the image below, you can see the chart of EURUSD on the left side, and the USDRUB (Russian Ruble) on the right side:
EURUSD moves smoothly and often forms clear long-term trends, while the USDRUB pair has much longer candles (deeper dips and rises), indicating more volatile price action. EURUSD accounts comprise about a third of the global forex trading volume, which tells a lot about its importance and potential. Traders appreciate this pair because of the many strong fundamentals driving its price. The US and EU are publishing macroeconomic data on pretty much a weekly basis that is known to fuel the trends.
All of these economic aspects have a significant impact on the EURUSD pair.
- consumer price index (CPI)
- gross domestic product (GDP)
- producer price index (PPI)
- employment data
- home sales
Some EURUSD traders work with the economic calendar and trade this pair solely based on data releases. This differs from many other pairs where most traders base their short-term trading decisions on technical analysis alone.
Lastly, it should also be mentioned that the EURUSD has another great advantage as the biggest forex pair in the market: Low spreads! Due to its popularity and an enormous amount of available liquidity, EURUSD normally has the tightest spreads, and therefore a lower trading cost compared to most currency pairs in the forex market.
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No, EURUSD is not the best trading pair
While EURUSD is by far the most traded currency pair out there, some traders claim that we shouldn’t limit ourselves to that pair only. In fact, there are many great currency pairs that have significant advantages over EURUSD.
For example, some traders like to start with USDGBP, as it’s much more volatile than EURUSD, which could translate into higher profits. However, you need to keep in mind that higher volatility also means a higher risk of losses.
USDJPY is another pair preferred by many traders. It’s less volatile than USDGBP, but what’s so special about it is that traders can follow a smooth and clear trend. The great thing about USDGBP and USDJPY is that both of them are majors, which means the spread offered on these by most forex brokers is generally tight.
What to take from all this?
It really does depend on what you call “easier” or “better”? Some might say a stable more predictable slow-burning trendline is ideal. To compare it with driving, do you prefer the rolling hills over smooth roads or the bumps and jumps of off-road. One way to find out which trading style is right for you is to open a demo account with Exness and trade risk-free. When you see which fits your personality, you can easily switch to a real account and start pursuing real results. Keep a disciplined approach. Being a full-time trader is something so many forex fans dream of, but it won’t happen overnight. Learn, grow, be patient, develop your skills. Ease into it slowly and enjoy.
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This article is a marketing communication and does not constitute investment advice or research. Its content represents the general views of our experts and does not consider individual readers’ personal circumstances, investment experience, or current financial situation. This article is not prepared in accordance with legal requirements promoting independent investment research, and Exness is not subject to any prohibition on dealing before the release of the article. Readers should consider the possibility that they may incur losses. Therefore, Exness is not liable for any losses incurred due to the use of its articles. Please note that past performance of an asset is not a reliable indicator of future results.