How To Select The Currency Pair That Is Right For You

How To Select The Currency Pair That Is Right For You

If you are a beginner with forex market trading, then you are getting ready to enter into a thrilling and volatile industry that offers traders both risk and reward.  With over $4.8 trillion traded every day and margin-based returns available for investors willing to take on the risk, there is definitely plenty of opportunity available for traders who acquire sufficient knowledge of the overall market and have a good understanding of the risks that are involved. One of the first decision you will need to make involves the currency pairs you decide to trade in.  This will significantly affect the eventual returns you achieve as well as your success overall.  How To Select The Currency Pair That Is Right For You

How To Select The Best Currency Pair That Suits Your Needs

The following are the key things to consider when selecting the best currency pair to trade:

1.  Major Currency Pairs

Generally speaking, there are several popular currency pairs that forex market investors commonly trade.  The exact level of demand for those pairs does fluctuate depending on what the current macroeconomic trends are.  The popular currencies are valued mainly based on the infrastructure and economic strength underpinning them.  Examples of these include the Euro and British Pound as well as the US Dollar and British Pound.  These pairs offer the advantage that they provide fairly reliable and consistent performance, which for beginners is ideal when they are still becoming familiar with how the market works.

2.  Make Use Of Real Time News Sources To Inform Your Decision

The problem with using major currency pairs exclusively, is that a narrow and singular mindset is created.  During hard economic times (which have a tendency to impact developed economies harder) it may cause losses.  To help offset this, diversity should be added to your portfolio.  To do this it is important to follow geo-political trends and real-time news that impact how your currency pairs will perform and inform your decisions ultimately.  There are online brokerage firms that can be found on finance forums that provide assistance with this.  They provide instant access to new resources in real time.  Global data released are collated and analyzed to help assist traders.

3.  Use Strong-Weak Analysis For Grading Currency Pairs And Individual Currencies

It’s also a good thing to expand your analytic mind and research the strength of currency pars and individual currencies within the live marketplace.  One especially effective and popular method for doing this is strong-weak analysis, since specific currencies are graded and they are evaluated by comparing them with competing alternatives.  It involves stimulating scenarios, where one currency is bought against various alternative options that help you decide on which currency pairs are optimal for you to trade.