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Forex is the only market that does not close during the week and covers the largest volume of business where people all around the world are participating. Also, it is one of the busiest markets with a daily turnover of more than 6 trillion dollars. Currency trading or forex trading is all about buying and selling currencies.
Currencies are always traded in pairs. The first currency of the pair is known as the base currency, and the second currency in the pair is known as the quote currency. The forex trading got so much popularity over the years into a system that promotes the exchange currencies globally.
If you are thinking of entering the world of forex, then this article will help you understand in which currency you must trade to get the best returns.
Major Currency Pairs
The strongest dominant currency in the world is the United States dollar as it is a reserve currency. The domination of the dollar is brought by the utter size of the United States’ economy. Consequently, these factors make the dollar a strong and preferred currency to pair it with other currencies. Here are some examples of other major currency pairs:
- The US Dollar and the Euro (USD/EUR)
- Swiss Franc and the US Dollar (USD/CHF)
- The Australian Dollar and the US Dollar (AUD/USD)
- The British Pound and the US Dollar (GBP/USD)
- The Japanese Yen and the US Dollar (JPY/USD)
- The US Dollar and the New Zealand Dollar (NZD/USD)
- The US Dollar and the Canadian Dollar (USD/CAD)
The fluctuations in the value of these currencies depend upon the trading volumes of the countries, which changes every minute. The above-mentioned currencies are associated with the countries which are greater in financial power and conduct a high volume of trade worldwide.
These pairs are the ones with great profit margins and high volatility, but on the other hand, these are the most volatile pairs as well. It means the price fluctuations could be significant, and traders can go home with a good profit or can lose everything they have.
The price movements of these pairs depend on the trading volume and the financial dominance of the countries. The lower spreads don’t always mean that these currency pairs are the best to trade.
The Most Profitable Currency Pair
There are more than 195 countries in the world so you can trade as many currencies as in the world. But you will get the highest profits with only a few currencies. That is why there are most of the traders likely to trade in these major currency pairs. Here are some most profitable currency pairs:
1. The EUR/USD
The EUR/USED pair is a safe haven and the most popular currency pair as it has the highest liquidity and is ubiquitous to predict. This pair has the lowest spread among all the modern forex brokers. It is not too volatile so, if you don’t want to take any risks, then you can use this pair to trade without causing too much doubt. The pair is linked to technical analysis, and also you can get a ton of information about this pair that will help you to avoid making some rookie mistakes. This pair is very sensitive to essential factors such as the monetary policies of the EU and US central banks.
The value of the EUR/USD pair can also be forecasted based on
- Liquid derivatives between the USD and EUR
- The economy of the EU and the US
2. The GBP/USD
12% of the total world’s traded currency pair is USD/JPY. This pair is identified by the erratic price movements, which makes it more volatile. Thus, the pair is great for aggressive and strategic traders who focus on quick profits. The British economy mainly influences this currency pair.
This currency pair is grouped into the most volatile currency pairs; however, so many traders choose it to trade as they find a lot of market analysis information from online resources. The higher will be the profits, the greater will be the risk.
3. The USD/JPY
USD/JPY is next on the list. It is another popular currency pair, and in the Asian market, it acts as the top currency quote. It is a worthy competitor of the EUR/USD pair. It is the second-ranked currency pair in the foreign exchange market as it is responsible for 17% of transactions of the currency market.
Benefits of trading USD/JPY currency pair:
- It has high liquidity same as the EUR/USD pair
- It ranks second according to volatility, hence, offers plenty of fluctuations.
- It is easy to forecast the price dynamics of the USD/JPY pair with technical analysis.
The Bottom Line
Forex trading is as risky as gambling, so, before investing a penny in the forex market, make sure you know enough about the market. You can start trading forex with a demo account with T1Markets. The broker provides a free demo account to its clients with virtual money to practise trading before start trading with real money. When you understand the basics of forex trading, then you are good to go.