Choosing the right pair of currency is very important to succeed in forex. If you don’t know how to choose a prolific currency that has great potential, we are going to help you.
We are going to share key tips that will help you pick the best currency pairs for a successful forex career.
Focus on Your Strategy
Choose the best pairs depends on your strategy. Trending strategy have different moving and ideal pairs as compared to a reversal strategy. If EURUSD is a trend, then its great for a trend trader, no reversal trader. You need pairs that have the best match with the right market structure.
Dynamic Status means the pair will change its status from trending to reversal many times, and you should perform analysis to find the right pair. You will lose interest in a pair after some time, especially when it starts to downtrend.
This is where you will need Forex calculators like currency convertor, margin, pivot point calculators.
Rely On 1 Currency and Understand 2 Currency Correlations
Choosing the best pair of a currency depends on how closely the currency pairs correlation with other pairs. When two pars are close correlated, there is a high change the result will be positive. This is sort of considered as a disadvantage as more of a risk when you take out any diversification benefit.
Create a Strategy and Use it with Tools
You need to choose your moving pairs based on which indicators and tools you use.. So, get experience with your tool and indicator. None of them are perfect, but it is your knowledge, familiarity, and practice that offers an edge.
Useful tools and indicators to select pairs could be anything. You will need to use a combination of tools and indicators to find out confluence. Use spotting patterns including chart patterns, candlestick patterns, trend, and reversal. They offer great insights into the current marketplace.
But don’t only rely on these tools, you need a Strategy Mix and Portfolio. Select the best-moving pairs depending on your strategy mix. If you trade with a single strategy, then the factor isn’t important.
Analyze your trading strategies to make sure they are not relying too much on same or corelated currency pairs, especially if you are using more than one trading strategy. Even if the strategies are different, this will increase risk by trading the same pairs from a portfolio.
Currency Characteristics, and Illiquid Pairs
Choosing the best-moving pairs depending on behavior pairs instead of your feelings and approach. Some currency pairs are prolific in trending mode while others are more suited for scalping to expect volatility.
Slow moving pairs are ideal for part-timer traders. Every currency pair has its own strength and weaknesses, some of them will suit you more than others. Choosing the best-moving pairs depending on selecting pair with the decent trader and spread.
Its possible a currency is perfect for you but do you want to trade using it? The fact is, most traders want to stick to their pairs unless they have any special reason to switch to something else.
Make Your Move
Selecting a pair somewhat depends on your personal preference. If you don’t like a pair, don’t trade it. Your forex experience with currency pair is valid, and you can use it to select pairs in the future. You need a track record on how a pair moves to help you identify more profitable pairs.
If you understand how a profitable pair moves, it will help you identify more pairs in the future. The time you must analyze a pair is also a deciding factor. For example, if you want to try the US Dollar, you need enough time to look at US Dollar currency news outlook, analysis and forecast before making a move.
Learn How Much the Market will Affect a Pair
High Impact affects pair and makes them rise or fall instantly. Therefore, you need to anticipate the direction a pair will more. Take a position before the news gets out. It is not uncommon for the price to move in both directions. This means you will lose big in a single trade.
We are not suggesting it will happen imminently, but it’s a possibility. The spread between bid and asking price is bigger as usual. This means you don’t find liquidity to get out of the position at your preferred price.
Therefore, instead of anticipating the direction, you need to develop a strategy that will get you back in business after this mess. One bad trade shouldn’t end your career.
Currency Pairs Photo credit: arbyreed on Visual Hunt / CC BY-NC-SA
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