The Best Forex Currencies to Trade

This article outlines the strongest Forex currency pairs to trade, and gives away one of my best Forex secret trading tips…

The Foreign Exchange (Forex) Market is the most active and highly lucrative financial market in the world today. It is estimated that despite not being centralized in any one location, this market deals in well over a trillion dollars every single day.

The Forex market, as you will know, deals in all the currencies of the world. Forex currencies are mostly traded in pairs. If you wish to understand how trading in Forex currencies works, then you need to first be well versed with the significance of Forex currency pairs. The basic concept is that a trader will exchange one currency for another while profiting from the exchange.

1. United States Dollar (USD):
The US dollar is the undisputed champion of the Forex market and all other currencies are almost always pegged against it. Furthermore, the majority of the pairs in the international Forex market have USD involved either as the base currency or the quote currency. The currency became the most significant variable in the Forex market after World War II.

2. Euro (EUR):
The Euro holds the second spot in the list of most traded currencies in the world after the US dollar, mainly because of its global presence. Moreover, the Euro is also the second largest reserve currency in the world. However, the Euro has always been pegged back by unfavorable economical situations such as low economic growth rates of countries of the European Union.

3. Japanese Yen (JPY):
This is the third most traded currency in the world even though it does not have as much of a global presence like the USD or the Euro.

4. British Pound (GBP):
The British pound has fallen from grace and lost its clout since World War II ended. Even so, it is still traded heavily in conjunction with the Euro and the US dollar.

5. Swiss Franc (CHF), Canadian Dollar (CAD) and Australian Dollar (AUD):
Although these three currencies are significantly smaller when compared against the big three, they are still major players when compared against all the other currencies of the world.

You also need to understand the implications of correlation between different currencies in the market. Correlation is where the movement of one currency affects another currency repeatedly.

Depending on the placement of the individual currency in the two pairs, the movement of the pair partners will either be directly proportional or indirectly proportional. This is the case in the currency pairs USD/CHF and EUR/USD : When one currency goes up against the US Dollar, the other currency will go down and vice-versa.

So here's the tip: If you are analyzing the EUR/USD market and see a chance to take a long position (ie, buy some Euros), take a look at the USD/CHF market and you’ll probably see there’s a high chance that the opportunity to take a short position (ie, sell) exists.

Leave Forex Currencies and return to Day Trading Forex Currency
Return to Forex Trading Beginner Homepage