There are 129 foreign exchange currencies in the world. You can form as much pairs as you can, but forming the most profitable currency pair is not an easy job that every forex trader can do. This is why novice traders rely on pairs that others are telling them. There are hundreds of currency pairs that are traded in the market, but there are only 7 most widely traded currency pairs in the online trading markets. To really get on the forex dance floor, forex traders need to learn math of each currency in which he is going to trade.
The key in selecting the currency really depends on the position you take on a particular currency pair and not purely on the economy of your currency’s country. With the 4 most traded pairs, an active forex trader may get positions for them throughout the day. Rather going in the confusing debates, the following excellent tips will allow you to select the most profitable currency pairs:
Open charts for seven currencies and listen to the business news channel to get any hint about market. Open charts of both currencies at the same time when you sit to study your pairs. It will save your time and you will be able to keep watch on both currency movements. I suggest you to take the look on the charts at coffee time, before any listening to any news and media. Looking the charts without any biasness gives you your own neutral analysis. In this way you will be able to learn what markets are doing and which pair are consolidating and which pairs are feeling pressures and so on. The neutral evaluation will allow you set positive mind-set for what to do next.
Skimming the Market Updates
Once you have gone through the charts and finished your coffee, you may turn on your news feed and see whether any unusual market change is going to happen. Check the local as well international news feed to get the broader idea.
Selecting the strong currencies
Always pick strong currencies with weak currencies as the currencies are traded against each other, having strong currencies will save you if currency is going to be more volatile. For example, EUR/USD will exhibit strong uptrend in case the USD is weakening and Euro is consolidating.
Doing quick Technical Analysis
Analysing trends and changes of studying the charts of multiple pairs will help to narrow down the choice of the pairs to be selected. Identify the pivot levels, support, and resistance about the currency pairs to polish the forex technical analysis further. Currencies have varying pip value than others. High pips will increase the chance make big profits but it will also have the risks of losing big as well. To increase your confidence in the market assess your risks appetite, and pip value to set our stop loss and price limit options. Trust in your research and technical analysis and follow your gut feelings rather than following what the other folk of investors is going to do.
By following the above set of rules, forex traders can easily find the best pair of currencies and reduce the risks of losses. Even if you are not confident after doing all this, do not try to push yourself. Just remember your investment as a fun rather taking too much depression and burden on your mind.