Trader Insights

The Forex market is one of the most exciting markets a trader can be involved in. The main reason behind this is the second to second fluctuation in the market. Due to this market’s general volatility, the Forex market has many opportunities for making a profit if you utilise the right strategy and choose the right currencies. If you want to trade Forex successfully, you’ll need to understand at least the basics of currency pairs. But what exactly are currency pairs? What are the best currency pairs to trade? Keep reading this handy guide to learn more.

What are Currency Pairs? 

Also referred to as Forex (or FX) Pairs, currency pairs are the quoted price of the exchange rate of two different currencies traded in the Forex market. An example of a currency pair would be EUR/GBP, which refers to the Euro/Great British Pound. Currency pairs refer to one currency in relation to another, comparing the exchange rate for traders to spot changes and potential opportunities.

Handy Forex Trading Terms

To ensure your understanding of currency pairs is as strong as possible, it is important to understand key Forex trading terms that will likely come up frequently in your trades. Here are 5 of our top handy Forex trading terms:

• Bid: A bid refers to the price a dealer is willing to pay for a currency. When you sell a currency you will receive the bid price.
• Ask: The ask is the price at which the dealer will sell the currency. When you buy a currency you will pay the ask price.
• Spread: The spread is the difference between the bid and the ask price. Traders often take the spread of a currency sale as a commission.
• Pip: In trading, a pip is an acronym for “percentage in point” or “price interest point”. A PIP represents the smallest amount of change an FX pair can have in the market.
• Volatility: Volatility in the market refers to price fluctuations, some of which can be beneficial for certain types of trading strategy.

Read More: The Glossary of Must Know Forex Trading Terms

How To Choose the Best Currency Pairs to Trade

Now that you understand the basics, the key way to ensure you choose the best currency pairs to trade is to understand market behaviour. Great market analysis will determine which strategies to employ and help you choose which currencies to trade. Is the market volatile or stable? Does the market have trending behaviour? These sorts of questions will influence your choice of currencies. For example: if you are a day trader, major currencies are going to be more suitable for you. Whereas if you’re a swing trader, major/minor and exotic currency pairs might be more appropriate. It’s important to do your research beforehand. If you are a newbie Forex trader and you have no idea what currency pair to choose from, look for those that have a high average daily trading volume.

How Many Currency Pairs Should I Trade?

The best strategy in Forex trading differs depending who you ask, but the general consensus is to use several currency pairs. This way you can spread your risk across various markets, which minimises the potential damage that could be done in case you get into a losing streak. Having trades open at all times should also allow you to take advantage of major price swings and cash in on them before other traders become aware of what is happening. 

As a beginner, it’s best to choose 1-2 major currency pairs and focus your efforts on learning and improving your performance trading these pairs to ensure you don’t spread yourself too thin too quickly. Ideally in the long run you can focus your efforts on 5-10 currency pairs.

Source

The Best Currency Pairs To Trade For Day Traders

EUR/USD: The EUR/USD pair represents the amount of US dollars required to buy a single euro. This currency pair is the most traded in Forex trading, as it is made of two of the world’s strongest economies. The exchange rate here is impacted by government policies and currency market’s demand and supply for the pair. This tends to be strong as the small spread of major currencies creates a high volume of trades. 

USD/JPY: The USD/JPY currency pair shows how many Japanese yen are needed to purchase one U.S. dollar. USD/JPY is the second most traded currency pair in the world and  trading this pair is known as trading the ‘Gopher’. There are numerous economical factors and indicators that impact this pair’s exchange rates.

GBP/USD: GBP/USD is one of the oldest trading pairs around. Also referred to as trading the ‘Cable’, this currency pair is another one of the most popular when it comes to trading Forex. GBP/USD exchange rate is influenced by factors that impact the value of the British pound and/or the U.S. dollar in relation to each other and other currencies. 

USD/CHF: One of the most common currency pairs in today’s foreign exchange market is USD/CHF, which represents a significant quota for daily trading. Both veteran traders and newcomers alike are attracted to this particular pairing due its popularity among traders from all over the world. Economic indicators from both countries, such as gross domestic product (GDP) and employment data, have a significant impact on this currency pair’s exchange rate. Trading this currency pair is also known as trading the ‘Swissy’.

AUD/USD: Trading the Australian dollar/U.S. dollar currency pair is known informally as trading the ‘Aussie’ among Forex traders. This is another of the most popular currency pairs to trade worldwide, as Australia is among the richest countries in the world when it comes to natural resources like coal, metals, diamonds, wool and meat. As Australia heavily relies on these raw material exports, this currency pair exchange rate is significantly impacted by commodity prices. 

USD/CAD: Also known as trading the ‘Loonie’, the U.S. dollar and Canadian dollar are another popular currency pair in Forex trading. This is a popular pair because of the large amount of cross border trading that takes place between Canada and the U.S. The Canadian dollar is largely considered a commodity currency due to the high amount of natural resources (like oil) that are mined and exported to the U.S, meaning that this currency pair is also significantly impacted by these commodity prices.

Ready To Start Trading Forex?

Are you ready to start your Forex trading career? At Alphachain, we offer training with expert mentors as well as access to your own trading psychologist to keep you on the right track. We even offer fully funded trading accounts. Look into our Global Funded Trader Programme today.

Discover Insightful Market Analysis Over On The Alphachain Blog or Check Out Our Alpha Funded Trader Program To Get Started! 

When you’re a new trader one of the best things you can do is to enhance your experience and education by learning as much as you can about trading.

Whilst a great place to start is with demo accounts and simulated trading platforms, another great resource that is often overlooked is books.

Below we’ve compiled our list of the 6 best forex trading books for beginners for exactly that reason.

Over time a number of different books about forex trading have been published and some of the very best contain invaluable information, advice and the beginnings of strategies that beginners can take with them as they develop their trading skills to become successful.

Risk management is a key component to successful trading. Without it, traders are dangerously vulnerable and could make just one or two bad trades before losing all their hard-earned money.

Remarkably trading risk management is an essential but often overlooked prerequisite to successful trading.

That’s because risk management helps negate losses by protecting traders from losing their money. If a trader can successfully manage risk however, they open themselves up to the potential of making significant money in the market. 

Below we’ve listed seven easy risk management strategies that traders new and old can use to keep themselves trading as securely and safely as possible.

A commonly asked question by both new traders and those inexperienced with trading leverage is: What does leverage mean in trading?

At its heart, leverage means a powerful investment opportunity. Hailed as one of the most indispensable tools for traders, leverage can be used to take advantage of the smallest price movements, make your portfolio geared toward greater exposure, or even stretch out your capital. 

However, just like any trading strategy, trading leverage also comes with precautions. Because trading leverage involves the use of borrowed capital, traders must ensure that they’re not borrowing – or risking – too much.

In this trader’s guide to leverage we’ll tell you all you need to know about what leverage is, how it works, and when (and where) it should be used.

If you’re brand new to trading Forex, you might find a steep learning curve ahead of you. Not only will you be learning the fundamentals of Forex trading, you’ll also be learning what feels like an entirely new language too, as Forex trading has a fairly comprehensive lexicon used by traders on the trading floor.

Initially beginners might struggle to follow quickfire conversations if they’re littered with Forex trading abbreviations, so we’ve compiled a helpful initial list. 

Below are the most common and necessary abbreviations for Forex traders to know and which they’ll likely come across in their reading or daily trading.

The terms Bulls and Bears first originated from the Stock Exchange and they’re now commonly used throughout most financial markets.

Although if you’ve never stumbled across them before, hearing the phrase “bullish vs bearish forex markets” might give you a moment of pause! 

For any trader however, knowing the differences between bullish and bearish markets can help immensely when it comes to executing successful trades.

We’ve defined them below and given some additional tips as to how to identify which a market is, plus recommended how traders should behave when faced with either a bullish or bearish market.

Cryptocurrencies are in essence, digital money. The difference between cryptocurrencies and other forms of digital money, like central bank digital currency, are that cryptocurrencies use blockchain technology to make them safe from counterfeit or double spend. 

Due to their widely reported security, self-custody aspects, and ‘digital gold’ comparisons, the popularity of cryptocurrencies is skyrocketing. Cryptocurrencies surge to the mainstream is so great that it has left brand new investors weighing up which is the best cryptocurrency to invest in 2021.

In this blog we’ve narrowed down the 7 best cryptocurrencies to invest in for new investors, and we’ve included one to watch. If you’re looking to start a career in trading cryptocurrency markets meanwhile, take a look at our funded cryptocurrency trader programme.

In trading terminology, indices is a just plural form of the word index. So when asking, what are indices in trading, what we really mean is “what are indexes in trading?”

For new and experienced traders alike, the first index that is bound to come to mind is a type of stock market index (e.g. S&P 500 or FTSE 100).

Trading stock market indexes, or indices, has long been a popular option for traders because it is considered one of the best markets to trade on and is often spoken about on popular financial media (e.g. Bloomberg). Index markets often have clearer charts than other markets, and also possess high volatility meaning that their trend is often much easier to identify. 

So for traders looking to get started trading the index market, here’s everything you need to know about trading indices.

Advancements in digital technology have changed the landscape of a number of industries, and trading is no different.

In today’s trading environment, traders are likely to encounter quantitative trading at some point. Quantitative trading includes high frequency trading and algorithmic trading and involves learning coding languages and programming.

This has set new traders on a path to learn coding for trading, but has also sparked a debate about the best programming language for financial trading.