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The global exchange never sleeps. It is the biggest intercontinental marketplace, where close to 6 trillion US dollars circulates daily. Participants, both retail and institutional, choose from a rich array of instruments. So, which ones are generally the most lucrative?
Pairs that change hands the most frequently include the US dollar. Majors are popular because they are tied to strong economies where trends are relatively predictable. A trader may receive real-time data via GBP/USD chart online, and make decisions accordingly. Meanwhile, exotics represent emerging systems that are prone to unforeseeable changes.
Overview of Pairs
Any tradeable pair, whatever its type, follows the same formula. This is ‘base currency’/‘quote (or counter) currency’. General classification may vary between brokerage brands.
- Majors are the most liquid, as they are tied to nations with the biggest trade power. This means they are the easiest to buy and sell. These combinations are connected to the vastest economies, and they normally include the USD.
- Minor pairs do not involve the key currency. These are fairly liquid and bound to strong systems like the Euro or the Swiss franc.
- Exotics are the rarest choice. These are monetary systems of developing states valued against stronger peers, e.g., The Euro priced in the Turkish lira.
Which Should You Choose
Majors seem like an obvious choice by default. Alas, the reality is not that straightforward. Naturally, the US dollar is the key reserve currency worldwide, and it is involved in most transactions. The most popular choices are also the most liquid.
However, this does not mean a badly timed trade will not bring a loss. You still need knowledge and foresight to spot lucrative points for entry and exit. Still, general trading conditions (including spreads) are more favourable than those for other pairs.
Examples: Popular Choices
If you want to play it safe, stick to USD/EUR. The duo gives tight spreads and decent predictability. Risk is seen as moderate due to low volatility. Besides, it is easy to find news concerning the state of both economies.
Alternatively, consider USD/GBP as a more volatile option. On the one hand, you may gain more from momentary ups and downs. On the other hand, the risk is higher. Data for analysis is also easy to gather.
No Magical Shortcut
No instrument guarantees profits. Results depend on personal skills and foresight. As most options include the US dollar, keep an eye on the health of the respective economy. Top trading terminals provide such data in real-time.
A rule of thumb is to choose pairs you are most knowledgeable about, and those that offer tight spreads (0-3 pips). The currency of your own country, if it is liquid enough, could be a reasonable choice, too. Knowledge of domestic trends will make its dynamics understandable and thus foreseeable.