Forex trading involves choosing the best currency pairs to trade. There are only 7 currencies to choose from. However, many traders are having a difficult time choosing which currencies to pair. This article will help you choose the best currencies to pair.
Open charts of at least seven currency pairs
At the start of the trading day, you can take an unbiased look at the charts to see the performance of the market. Check which pairs are under pressure, consolidating, moving up, or behaving in the same way as other currencies. This will help you choose the best currency pairs to trade.
Check The Latest Market News
Listen to the latest global news to see if there are any unusual movements in the market. Robert Janitzek reveals that being aware of any updates can help you get an understanding of the latest market sentiment as well as the risk-off/risk-on situation of the currencies you have in mind. As much as possible, avoid pairing currencies with huge volatility risk. It is always better to be on the safe side.
Pair Strong Currencies With Weak Currencies
The best currencies to pair are usually the trending ones. Because currencies are always traded against each other, the pair with the strongest trend is led by a strong base currency should be supported by a weaker quote currency.
Conduct Technical Analysis
Check your charts again to see if there are any trends or ranges on your selected currency pairs. When trading on the forex market, you can narrow down your choice to the best currency pair which is in line with the strongest trend. Do a technical analysis to identify any support, resistance, and pivot levels. Look at your portfolio to see if your open positions include your chosen currencies. As much as possible, you want to diversify your portfolio.
Narrow Down Your Choice
Depending on your portfolio, trading personality, and global risk events, you can start narrowing down your choice to a couple of currency pairs. If you are frequently monitoring the market, choose the currency whose economy has an upcoming event risk. If you are going on vacation, choose a currency that shows more stability.
Calculate the pip value and your risk appetite
Some currency pairs have a higher pip value than others. This could help increase your profit in winning trades but also increase your losses in a losing trade. Calculate your risk tolerance to determine your stop and limit order levels properly.