When you're first starting out it can be fairly difficult to decide which currencies are the best ones to trade. Do you watch all of them or only concentrate on one or two?
Well in truth there's no right and wrong answer. If you have a rigid trading system which produces consistent profits whatever the currency pair, then you may want to open a window for each pair, ideally on a multiple monitor set-up, so you can watch for your entry criteria to be met for any of these pairs.
So for example, let's say your trading criteria is a MACD crossover, a Supertrend change of colour, and RSI in overbought/oversold territory.
In this instance, you would simply create graphs containing this data for every major currency pair, and wait for a suitable entry for any of them.
That's one approach. Another approach, and one favoured by myself, is to only concentrate on the major pairs. This is because they are the most traded, and therefore charting patterns and technical indicators are generally more reliable and tradeable.
Another reason why I take this approach is because these pairs have the tightest spreads. This is extremely important because you really don't want to be trading pairs that have wide spreads simply because it limits your profits more and puts added pressure on you to make correct calls.
Over time these wider spreads can really eat into your profits, so I generally stick to three of the four major currency pairs - GBP/USD, EUR/USD and USD/JPY (USD/CHF is the other but that has a spread of 4 points with the broker I use).
I can easily watch these three pairs at once and watch for any entry points, but if you're just starting out, another approach could be to just concentrate on one pair. You will find that although most pairs follow technical indicators very well, each pair has it's own personality and so by concentrating on just one pair, and learning how it behaves, you may find this is the most profitable approach to take.
Another factor is your location and the time at which you are available to trade. For example, the GBP/USD is most active between around 8.00 GMT and 20.00 GMT, so if you're based in Australia, for example, you would miss most of the action if you wanted to trade in the daytime where you are.
So to conclude, there aren't really any best currencies to trade, each pair is potentially very profitable. However, the major pairs generally have the tightest spreads and are the most actively traded, and generally conform very well to technical analysis, so these are the currencies I would recommend trading.
Source |
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