How to Find the Best Pair to Trade in Forex 

As you may well know, currency trading, also known as Forex, is the process of converting one currency into another. Due to time zone differences, the Forex market is open for the majority of the business week, unlike stock trading. 

This exciting market has left many participants to ask an important question: “How to identify and find the best currency pair to trade in forex?”

This article will help you understand the most important factors to consider when it comes to choosing a currency pair. Moreover, We compiled data on three of the most popular and profitable currency pairs that might help you make your way in the Forex market. 

The Importance of Choosing a Right Currency Pair

Picking the right currency pair, and pairing it with the right trading strategy, is one of the most important aspects of trading. If you choose the right pair, you can make a lot of money, but you’ll lose money if you pick the wrong pair. This is one of the similarities between the forex and stock markets, except that we trade currency pairs instead of trading individual stocks.

When it comes to choosing a currency pair in the Forex market, there are three main factors to consider, and in the following sections, we will discuss the step-by-step method to identify the right Forex pair.

Step By Step Method to Identify the Best Pair to Trade

Step one is to determine whether the pair is trending or non-trending.

The second step is to decide what kind of trading strategy you’ll use.

Finally, the third step is to know the pair’s ATR – average true range – (which means how much the pair moves each day).

Now let’s dive in and discuss how to pick the best pair to trade based on your trading style and strategy.

Identifying the Best Pair to Trade – DEEP DIVE!

As mentioned above, when deciding which pair to trade, the first step is to determine the trend. The overall trend or direction in which the market has moved in the recent past is defined as a trend. 

For example, one can say that “the Jpy/Usd has been in an uptrend for the past six months.” 

You can identify trends using trend lines or applying moving averages (MA) to your charts. If the pair hasn’t been trending, you’ll want to pay attention to the sideways trend before deciding which one to trade.

The next step in determining the best pair to trade is to ensure that the pairs are compatible with the trading strategy you intend to use. Your pairs must be trending pairs if you’re trading a trending strategy. You have a losing strategy if you try to trade a trending strategy on a sideways pair. In short, your chances of being a profitable trader increase dramatically if you use a trending strategy and identify trending pairs. 

Needless to say, if you come across a pair that has been moving sideways for a long time, you should use a range trading or sideways market trading strategy to trade those pairs.

The last step is utilizing the ATR. The Average True Range (ATR) is the average amount of pips moved in a single day. Because you won’t know how much a pair moves on average if you don’t know ATR, it’s much more likely that you’ll hit your stop loss. 

This is critical when deciding which pairs to trade based on your strategy and trading goals. If you are a scalper looking to make a significant percentage gain in a short period of time, you should pay special attention to pairs with a high ATR because they can move a lot, and you don’t want your stop loss to be too tight.

Wrapping Up the Pair Selection Process

Most traders disregard carefully selecting the currency pair they’re trading and believe they can trade any pair with any strategy. This trading strategy mistake is one of the main reasons beginners lose money, so don’t make the same mistake of pairing the wrong pair with the wrong strategy. 

You’re now armed with the knowledge to pick the right currency pair with the right strategy to improve your trading. 

Below, we have gathered the top three best-traded Forex pairs that you can use.

Our Pick For the Best Forex Pairs

Now that you know more about Forex, you’ll need to decide which forex pairs you want to trade. This ranking is based on performance and popularity in the past. Remember, these top three picks are not based on your individual strategy and are based on other standard metrics.

1. USD/EUR

USD to EUR is a shorthand for “conversion of United States Dollars to Euros,” It is one of the world’s most widely traded currency pairs.

The Euro is a stable currency that symbolizes the European Union and serves as the official currency of 19 of the EU’s 28 members. Austria, Belgium, Cyprus, Estonia, France, Finland, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain are among the countries that use the Euro.

Political events that affect the Dollar or the Euro in relation to one another have an impact on the USD/EUR pair. 

When the European Central Bank intervenes in market activities to strengthen the Euro, for example, you can expect the Dollar to Euro cross to fall.

2. USD/JPY

The Japanese yen (JPY) is the country’s official currency, and it dates from the Meiji restoration’s attempt to modernize and westernize Japan’s economy. Following World War II, the yen lost a significant portion of its value, but it has since begun to stabilize after reaching a low following the 1973 oil crisis.

The yen is a popular reserve currency alongside the US dollar, Euro, and British pound. Because of the Japanese government’s active stability intervention policy, the yen is considered to be held under a “dirty float” regime. This means that the value of the yen sees a number of fluctuations daily, but the central banks of Japan frequently buy and sell the currency in considerable amounts to keep exchange rates under control. The Japanese government keeps the value of the yen low to facilitate a competitive export market.

3. USD/CAD

Because Canada is America’s fiscal neighbour to the north and one of their most important trading partners, it’s no surprise that the CAD and the USD have a close relationship. The Canadian dollar’s value is closely linked to commodity prices.

Because Canada’s economy is heavily reliant on oil exportation, the price of oil has a significant impact on the value of the Canadian dollar. Oil prices fell to levels not seen in over a decade in 2016, and the Canadian dollar suffered as well, falling to a 1.46 CAD to 1 USD exchange rate.

If you want to convert USD to CAD, keep an eye on the price of oil to see when the best time is to buy.

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