Besides monitor gold prices to make profits from the XAUUSD Trading portfolio. Perhaps any trader participating in the foreign exchange market invests in Forex currency pairs. Because this is also a popular investment portfolio and brings the best profit source for traders. Today, Learn Forex Trading will introduce to you content about Forex currency pairs and some related issues. So, please take a few minutes to read and update yourself with these extremely useful sources of knowledge.
Find out what is the definition of Forex currency pairs.
A forex currency pair is understood as a currency pair or foreign exchange pair. It will include the two currencies being paired and the exchange rate of these two currencies. One currency will be considered the base and the other currency will be called the counterpart. Currently, currency pairs in Forex are divided into 3 types: major, minor, and rare currency pairs. Among them, the main pairs are strong currency pairs of countries with strong economies. And also the Forex currency pair is preferred by most traders.
See more: Discover the “secret” about XAUUSD price
List of 7 main Forex currency pairs on the market today
According to experts, Forex currency pairs are those with large trading volumes, low spreads, and high liquidity. Those 3 factors are the Forex currency pairs that many investors prefer to choose. Accordingly, the 7 main Forex currency pairs today include:
Traditional major currency pairs
The 4 traditional Forex currency pairs are:
- EUR/USD: A currency pair between the Euro and the US Dollar. This is the currency pair traded by investors with the largest volume. Because they are the two currencies of the two countries with the largest economies in the world.
- USD/JPY: Currency pair between US Dollar and Japanese Yen. This currency pair has high liquidity so it is also preferred by traders.
- GBP/USD: This is a combination of the British pound and the US dollar. Despite having a relatively large spread, this currency pair is always in the top 5 most traded currency pairs in the world.
- USD/CHF: This currency pair shows how many Swiss Francs are needed to buy one US Dollar.
Forex currency pairs commodities
3 currency pairs are in the list of major currency pairs in Forex, which are:
- AUD/USD: Currency pair between the Australian Dollar and the US Dollar. Because Australia is a country that thrives on trade, and export… creates a lot of fluctuations, the AUD/USD currency pair is always of interest to many traders.
- USD/CAD: A currency pair between the US Dollar and the Canadian Dollar. Investors often invest in USD/CAD because the Canadian currency has a close influence on world oil prices.
- NZD/USD: Currency pair between the New Zealand currency and the US Dollar. Because New Zealand is the world’s largest exporter of milk powder. Therefore, the NZD currency is also affected when production activities fluctuate.
Why should you invest and trade with Forex currency pairs?
Investors have relied on volatility from currency pairs to invest and trade. Because it has smaller spreads compared to other currencies. At the same time, high liquidity brings large profits to traders. Therefore, the trading volume of these currency pairs is extremely large and always at the highest level. However, thanks to that, investors can enter or exit the market easily.
Conversely, Forex currencies with low volume will be difficult to buy or sell in the market. Besides, it also moves prices significantly, and the risk of price slippage increases. Lack of stability makes it difficult for traders to predict price trends. Therefore, these currency pairs do not attract traders with little experience.
How will the prices of currency pairs be calculated?
So do you know how foreign rates of exchange will be calculated? It will be divided into 2 types of prices, including bid price and ask price. The value of a Forex currency pair will be determined based on the strength or weakness of the base currency relative to the cross currency. In which, the value of the base currency will always be 1.
Example of price fluctuations of Forex currency pairs on the market
The prices of trading pairs are constantly changing. However, for major pairs, there will be low price volatility and stable stability. To help readers better understand the price fluctuations of Forex currency pairs on the market. The following is an illustrative example of the EUR/USD currency pair.
For example: The price of the EUR/USD currency pair is 1.1285. This means you will have to pay 1.1285 US Dollars to buy 1 Euro. If the exchange rate drops to only 1.1238, the value of the Euro has decreased. Conversely, when the exchange rate increases to 1.1290, the value of the Euro increases or the US Dollar decreases.
See more: Opening and verifying an ICMarkets account
How to choose the appropriate Forex currency pair to trade?
With so many currency pairs, how can you choose a suitable Forex currency pair for your strategy? If you are having difficulties as above, apply some of the following methods:
- Traders should clearly understand the differences between trading currency pairs. Thereby, finding out what they are reflecting about the economic and political situation…
- Clearly define trading goals that suit your needs. If you want to make quick profits, traders can choose currency pairs like EUR/JPY or GBP/JPY. If you want to invest for the long term, you should choose the USD/JPY or EUR/USD pair.
- Assess possible risks to prevent and limit losses. If traders choose pairs with large amplitudes, the risk will be higher. On the contrary, when choosing stable pairs, the risk is low, which means the profit is also low.
- It is recommended to test the strategy with Forex currency pairs on a Demo account. From there, it helps you understand the properties and determine which is the right choice for your method.
summary
Above are the contents about Forex currency pairs that you need to Know to Learn Forex Trading. Hopefully, it will be a useful source of information to help your investments be successful. Thank you readers for spending your time with us and we hope to accompany you through many other articles.
FAQs:
Which is the most profitable Forex currency pair?
Beneficial currency pairs are those that are traded most frequently. Of which, about 70% of foreign exchange is between USD, EUR and JPY. The remaining 10% are currency pairs between GBP and AUD.
Which currency pair has the lowest spread?
The smaller the difference, the greater the profit the trader will receive. Therefore, currency pairs with small spreads are often chosen by investors. Including EUR/USD, AUD/USD, USD/JPY, NZD/USD and USD/CHF.
Which currency pairs should I trade on Forex?
Deciding which currency pair to trade depends on many factors. However, experts encourage traders to trade currency pairs such as USD/EUR, USD/JPY, USD/CAD, GBP/USD, USD/CHF, and AUD/USD.
