Choosing The Right Forex Pair For You
Choosing a forex pair or currency pair in forex trading is something that is important but rarely noticed by traders, especially beginner traders. Choosing a pair that matches our trading type character is very important, it is to find comfort in trading activities. Well what should be considered in choosing the best forex pair?
Things we should find out to find the best pair we can know through the spread. The majority of brokers offer small spreads, especially in EUR / USD pair. Yes, most brokers provide the lowest spread against this currency pair. In the broker fix spread, EUR / USD is offered with a spread of at least 2 pips and a maximum of 3 pips, but on the ECN broker can reach 0.8 pips or even lower. Of course the EUR / USD pair is favored by the scalper as it is known for its low spreads and stable movements.
Like EUR / USD, the GBP / USD pair is also a bit similar, but sometimes it has a higher spread, just a few pixels. The GBP / USD currency pair is also well known for its high volatility and range every day, so often intraday traders make orders on these currency pairs.
You need to know, even though the GBP / USD is known as a pair that has a stable movement like EUR / USD, but now the couple becomes more 'wild' moves due to very sensitive to issues and political developments between the EU and Brexit Referendum. So expect you to be more careful if trading in GBP / USD pair and coincide with events that discuss Brexit, such as the development of Brexit negotiations.
The USD / JPY currency pair is sensitive to what is happening to Japan and the United States, whether it be economic or central bank policy. It is usually negatively correlated with the movement of EUR / USD. When the USD strengthens, the EUR / USD pair will move down and also USD / JPY will strengthen. While in the EUR / JPY pair will usually move randomly with the shadow (tail) on each candlestick.
The USD / CAD pair trades the dollar against the Canadian dollar. Pair is closely related to world oil movement. Because Canada is the world's oil supplier, so oil prices will affect the value movement of the Canadian dollar. Sometimes this pair is negatively correlated to USD / JPY, although both base currency is USD. This is due to the negative correlation between oil price and USD value.
Japan is an oil consuming nation and when the price of world oil rises then Japan will also pay more to buy oil, it affects the decline in the Yen currency. Well on the science of correlation strategy pair it is often used by traders to seek profit in USD / JPY and USD / CAD pair.
AUD / USD, this currency pair is related to gold price due to gold commodity price correlation with Australian dollar. When the price of gold soars, the value of the AUD currency will usually strengthen and make the AUD / USD currency pair move up. This is because the Australian State is one of the largest gold producers in the world. It is also used by traders who are able to analyze the movement of gold as well as the inverse correlation to the US dollar exchange rate.
Well that's how to choose a forex pair that suits your ability and type of trading. In order to understand what influences the currency movement you should learn about the economic conditions and related commodities.
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