Top 6 Best Forex Pairs To Trade 2023 Reviews
The Forex market is growing quickly as investors learn about profitable Forex pairs and begin to trade foreign exchange currencies. However, many investors are wondering which major currency pairs are best to start trading with. How can we know that the exchange pair we chose will be profitable? There are some key factors to determining the worthiness of a currency pair for trading, and we’ve broken down the considerations investors should take, as well as some examples of the top 6 currency pairs to trade on the Forex market to make a profit.
Read More: Best Forex Trading Platforms 2023
What are Forex Currency Pairs?
Forex pairs are just pairs of two currencies that are exchanged, one for the other, in a Forex trade. Think of exchanging your euros for dollars when making a trip to the US. In this case, EUR/USD would function as the currency pair.
When looking for Forex pairs to trade, it’s important to check out those countries’ geopolitical, economic, financial, and political happenings. You’ll essentially be investing in a country when you buy a foreign currency, and you want to make sure you choose the best currency combinations you can.
How to Choose The Best Forex Pair to Trade
There are several key considerations to make before choosing a currency pair to trade on the Forex market. Some popular Forex pairs might be riskier, and some exotic currency pairs might be more worth your time, depending on the factors listed below.
More liquid currency pairs are able to be traded quickly, and they typically have more activity from Forex traders. Liquidity is important because if you need to make a speedy trade, you want your currency pair to be highly liquid.
Since most major currency pairs are being bought and sold frequently, they tend to have much higher liquidity. On the other hand, if you choose more minor currency pairs, you might have trouble putting in a quick trade and capitalizing on the market movement that you wanted to profit from.
Volatility is a consideration for any stock trading, investing, and market choices. Volatility essentially indicates the movement of an asset’s price, including ups and downs. In Forex trading, this volatility can be capitalized upon to make a profit when selling currencies low or buying them high when currency values rise.
So, volatility might be a benefit to the Forex trader, but proceed with caution. Volatility (or price movements) can be affected by many factors, but the most common in this arena are the exchange rate, interest rate, central banks’ choices, political and financial events, and overall investor trust.
Time of day
Technically, you can trade Forex any time of day, 24/7. However, the major currency pairs are part of 4 different time zones, which have different market hours. These hours do overlap, and experts say this can be a great time to trade Forex since the market is most active, liquidity is high and major currencies are moving.
For example, the US and London markets overlap from 8 AM – 12 PM, and this is a great time to trade this most popular Forex pair.
Top 6 Best Major Currency Pairs to Trade 2023
Let’s get to the good part. Which currency pairs are currently the most beneficial to trade? Below are 6 of the best currency pairs to trade on the Forex market. If you choose these pairs, your Forex trading journey will probably be off to a good start.
The US dollar and the euro are the most commonly traded currency pair. If you get investment advice from an expert, they’ll tell you that this is a great currency pair to start with. They are traded at a higher volume than other Forex pairs, and they are frequently volatile, allowing investors to profit from their pricing movement. The US dollar is the base currency in many popular currency pairs, so get used to seeing “USD” or the US dollar as the first currency listed.
The US dollar and the Japanese yen are two other popular currencies to trade. This currency pair is preferred because of its high liquidity and high volatility as well. There is also a direct correlation between US interest rates and the weakening of the value of the Japanese yen. This can create predictable patterns for traders to plan out and enact their trades with. When they closely follow interest rates.
Another one of the most popularly traded currency pairs is the US dollar and the Canadian dollar. This is seen as one of the best Forex pairs because it is typically liquid and volatile. The Canadian dollar is also closely tied to interest rates, and it is considered one of the commodity currencies because it is closely tied to the price of oil (a commodity). This correlation can help investors view market events and purchase or sell the US dollar against the Canadian dollar at the right times.
The US dollar and British pound pair is another one of popular cross-currency pairs. This pair is another that is highly affected by both countries’ interest rates. Like other popular currency pairs, this pair includes high liquidity and high volatility, and a wider spread than most heavily traded currencies. The British pound also has a positive correlation with the euro.
The US dollar and the Australian dollar are yet another popular trading pair that investors capitalize on to maximize their earnings in Forex markets. The Australian dollar is heavily influenced by commodity prices, and investors can track these price changes to profit from this currency pair. Interest rates also affect this pair directly, and they are known for their liquidity and volatility.
Last but not least, the US dollar traded against the Swiss franc is another great option for trading Forex. GDP and economic data typically have the biggest effect on this pair’s value, and it’s known for being a fairly stable currency pair. This means less volatility, but the US dollar traded against the Swiss franc still typically has high liquidity.
5 Basic Steps to Start Trading a Forex Currency Pair
Before you dive in and start trading major currency pairs, you’ll want to complete several essential steps to get to your first trade. We’ve listed a few helpful steps below.
Find a Reliable Broker
First of all, you’ll need a Forex broker to help you put in your trades. Whether you plan on making daily Forex trades or trading every once in a while, you need a qualified broker to help you place trades in the Forex markets. Make sure you check the broker’s fees, if they allow Forex trading in your country, and what type of membership or account minimum is required to open a brokerage account.
Create Your Own Trading Strategy
Next, you’ll need to educate yourself on major Forex strategies and decide which strategy would best fit your budget, risk comfortability, and currency trading style. We recommend focusing on the correlations between major currency pairs and market movement, tracking this movement, and making a plan for buying and selling Forex based on these economic, political, and financial movements.
Choose Forex Pairs You Want to Trade
Next, choose which major pairs you’re comfortable trading. This list of 6 major Forex pairs is a great place to start for beginner and advanced traders alike. If you have more comfort with a certain currency than another, choose a pair with this currency. Remember that as you trade currencies, you’re essentially investing in a country’s main currency. Research and choose your currency pairs accordingly.
Follow Your Strategy
Now it’s time to enact the strategy you came up with. Stay abreast of major market news and track the movements of your chosen currency pairs. When the price and market movements indicate a buy or sell, get ready to put in your trade. Make sure you’re not making a trading choice based on hype or an emotional day, but truly use your strategy and sound mind to make an educated investment choice.
Place Your Order
The last step is to start trading Forex. Your first Forex trade should come after careful education, watching market data, and choosing a reputable broker. Placing your order might be instantaneous, based on the broker you use, or it might take a few minutes or hours. You also may have to pay commissions or fees on the trade. Congratulations if you’ve reached this last step! You’re now a Forex trader.
Read More: Forex Trading Tax
The Top 2 Forex Trading Platforms
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eToro is one of the best places for beginners to start their currency trading journey. They have a super user-friendly experience, helpful and available customer service, and low Forex fees. Their investor guide helps newbies start their trading journey with the resources they need.
Their vast array of investment options like stocks, ETFs, bonds, crypto, and options, makes them one of the most diverse brokers out there. However, we will note that eToro doesn’t currently offer Forex trading to US customers.
CMC markets is another popular broker that allows investors to trade Forex currency pairs. We love their ease of use, their updated market data, their awesome mobile app, and trade suggestions.
If you don’t know where to start with trading the best Forex pairs and other investments, CMC Markets is a great place to start. They also have a learning center to help investors arm themselves with relevant information when trying to make a profit while investing.
CMC is known for their CFDs and Forex charts and trading abilities, and they might be better suited for more advanced investors. They do offer education, but the day trading, Forex trading, and crypto trading that they offer do present more risk to the newbie investor. The abilities of their system are impressive but might be more overwhelming for newbie traders. Again, CMC Markets doesn’t allow US traders to take advantage of the Forex markets.
Whether you want to put in daily Forex trades, or just add other currency pairs to your portfolio, these 6 major currency pairs comprise much of the market and they could be a great next step for your investment journey.
Since trading pairs include investing in a country’s actual currency, it’s best to educate yourself on their economics, major news, and other relevant news that might affect the currency’s valuation. The proper steps and education are key to making a good trade when looking for the best Forex currency pairs to trade.
Frequently Asked Questions (FAQs)
A low spread typically means that the foreign currency you’re considering is highly liquid, and at the time not as volatile.
A wide spread typically means that there is a wider gap between one currency price and the other. This will typically result in low liquidity, and it indicates higher volatility.
Parity means that the value of one Forex currency is exactly equal to the other currency at that point in time, or a 1:1 ratio.
A base currency is the currency you are comparing a quote currency against, to value the quote currency. When defining currency pairs, the base currency is the first currency listed.
This type of currency is the currency you are comparing to a base currency. When defining currency pairs, the quote currency is the second currency listed.
This question really depends on your trading strategies. Any Forex pair can be profitable if you time the market right, and these top 6 pairs are a great place to start if you want to make a profit.
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