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By sticking to the most popular pairs in Forex (called the MAJORS) you know you’ve got the most liquidity:
PAIR
CURRENCIES (NICKNAME)
EUR/USD
Euro / US Dollar (Fiber)
USD/JPY
US Dollar / Japanese Yen (Gopher)
GBP/USD
UK Sterling / US Dollar (Cable)
USD/CHF
US Dollar / Swiss Franc (Swizzy)
USD/CAD
US Dollar / Canadian Dollar (Loonie)
AUD/USD
Australian Dollar / US Dollar (Aussie)
NZD/USD
New Zealand Dollar / US Dollar (Kiwi)
Some currency pairs are more volatile than others. This makes them better to use in trades as they trend. The best currencies to trade are those of countries that are the major role players in the world economy (these are called “G7” countries). The G7 was formed in 1976, when Canada joined the Group of Six: France, Germany, Italy, Japan, the United Kingdom, and the United States.
You’ll see that the spread on the “major pairs” from the G7s is much lower than on less popular pairs from weak countries with chronic economic and political instability. Example: The spread on the EUR/USD is between 1.5 and 3 pips because the major countries making up the Euro Currency and the United States are BOTH G7 countries.
Take South Africa for instance. I think Nelson Mandela is a pretty cool guy. His story is a classic “Think and Grow Rich” example of a definite major purpose and definite desire having transmuted his dream to reality. But I DON’T trust the WACKO government that has evolved from the hatred not only of whites against blacks (apartheid) but also of blacks against whites. Change happened WAY TOO FAST IN SOUTH AFRICA and because of that it is now an unstable 3rd world political economy. The law of an equal or greater benefit will come of the political economic tragedy that is South Africa but it will be in the future as I write this.
Because of this the spread on the USD/ZAR pair is about 60 pips – 20 times more expensive to trade than the EUR/USD – reflecting the high instability of this African political economy.
The safest place to learn Forex trading is in the EUR/USD pair where a full 1/3 of all Forex trades occur. Then, after you know what you’re doing, you can venture out into other pairs on the list below. For instance, there are some CROSS PAIRS that are also good for trading. So when we add the two strongest CROSSES and delete the two weakest MAJORS from your list of TRADABLES above here’s an alternative group to trade:
PAIR
CURRENCIES (NICKNAME)
EUR/USD
Euro / US Dollar (Fiber)
USD/JPY
US Dollar / Japanese Yen (Gopher)
GBP/USD
UK Sterling / US Dollar (Cable)
USD/CHF
US Dollar / Swiss Franc (Swizzy)
USD/CAD
US Dollar / Canadian Dollar (Loonie)
GBP/JPY
Euro/Yen Cross (Geppy)
EUR/GBP
Euro/Cable Cross (Chunnel)
THE TRADABLE EIGHTEEN
There are many official currencies that are used all over the world, but there only a handful of currencies that are traded actively in the Forex market. In currency trading, only the most economically and politically stable countries have currencies that are traded enough to be liquid. For example, due to the size and strength of the United States economy, the American dollar is the world’s most actively traded currency.
Daniel Hall
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