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Currency Pairs for Beginners
For the beginner, knowing what currency pair to trade may seem daunting. Let the ECMarkets Education guide help:
It is commonly accepted that the best pair of currencies for the beginner is EUR/USD currency pair. This is primarily because of the high liquidity that results in a lesser spread and thus the costs to the novice trader will be lower. In addition, the EUR/USD pair of currencies is simple to trade as there is a wealth of data and information easily found regarding it, here at ECMarkets and elsewhere on the internet.
It is good practice for Beginners to try and steer clear of currency pairs that demand in-depth familiarity to generate profits by trading. An example of this is the EUR/JPY currency pair which may rise gradually but is liable to go down within a very short space of time. Alternate currencies such as the Canadian Dollar have certain identifiable traits; an example of this is the oil price being a big factor in the rate of the CAD or Canadian dollar (also called the Loonie), as Canada is an exporter of oil. The recent and now increasingly irregular movements in the oil market may determine even more volatile movements in the CAD rate. On the opposite side of the spectrum is Japan, who remains a major importer of oil, so when the price of oil moves the Japanese Yen may also be impacted, however it will be in the reverse way to the CAD.
Considered the three simplest currency pairs to trade are: EUR/USD, GBP/USD and USD/JPY
EUR/USD – By far the most traded currency pair, with a spread noticeably the lowest of all. The EUR/USD pair is a great pair for novices as behaves almost invariably according to simple principles that novices find easy to study and master in the very beginning. The EUR/USD pair is a reasonably stable currency and is seen as a safe trade with less volatility and fewer risks.
Due to global exposure the EUR/USD pair is one of the easiest, if not the easiest currency to apply analysis – both fundamental and technical.
USD/JPY – This is a popular currency that has a lower than normal spread, just like the EUR/USD. This makes it very appealing to traders. A feature of the USD/JPY pair is more regulated movements, when compared to other currency pairs. Overall because of the smoother trending and good profitability the USD/JPY remains one of the most popular currencies to trade.
GBP/USD – Traditionally a currency pair that is prone to larger movements, resulting in a greater number of pips than can be found in the EUR/USD or USD/JPY. This currency pair is definitely one of the more volatile currency pairs; with the big rewards, of course, come the proportional risks. A big plus with the GBP/USD pair is the amount of exposure, analysis and market research (technical and fundamental) available, all of which ensures it is a popular currency to trade.
ECMarkets Currency Pair Trading Tip:
To really get the best out of each and every trade and give yourself the greatest chance of trading success it must be recognized that all currency pairs behave differently. Look at everything – risks and rewards and tailor trading strategies for the different currencies.
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