The Best Currency Pairs to Trade

When someone makes up his mind to enter Foreign Exchange market, one of the first and the most important questions to ask is about the best and the most predictable currency pairs to trade for beginners. Well, before answering this question, let us get acquainted with the types of currency pairs and see how they differ from each other.

There are three types of currency pairs: majors, minors and exotics. 

Majors are the most actively and frequently traded currency pairs in the market. American Dollar, International European Currency — Euro, Australian Dollar, Canadian Dollar, British Pound Sterling, Swiss Franc, Japanese Yen are the major currencies and respectively they form the major currency pairs: EUR/USD, AUD/USD, USD/CAD, GBP/USD, USD/CHF, USD/JPY. As it can be seen all major currency pairs have the US Dollar either in base or in quote part. Actually, majors are the most liquid, stable and predictable currency pairs in the market. They have the lowest spread in comparison with other currency pairs and that is the main reason why beginners are advised to trade mainly these pairs at the beginning.

Currency pairs that do not include the US Dollar in them are known as minor or cross currency pairs. These pairs are called minor or cross, because in the times when someone wanted to exchange a certain amount of money into a different currency, he had to first convert that money into U.S. Dollars and then convert it to the desired currency. The invention of crosses helped individuals and traders to exchange various currencies directly. Actually, beginners are not advised to trade cross pairs, as they will need to have good economic knowledge of different countries. In comparison with major currency pairs their spread is higher.

Currency pairs that are not so common in the Foreign Exchange market are known as exotic. Actually, exotic currency pairs contain a currency from developing countries such as Asia, Africa, Middle East, etc. These pairs are traded quite rarely and that is the main reason why their liquidity is low. Beginners are not advised to trade these pairs, as they are considered to be very risky, because the situation in developing countries is quite unpredictable and uncertain.

Actually, it is highly recommended to start trading with the majors, since their liquidity is high and there is lot of information on these pairs. However, traders have various preferences and they may start with completely other pairs, even from exotic ones. In fact, it also depends on the trader, since the resident of any country may prefer trading the currency of his own country and this is quite normal, because he has better knowledge on that currency, rather than others.