What to trade on forex

The mechanism of exchanging one currency for another, or converting one currency into another, is known as forex currency pairs trading.

Due to time zone differences, the forex market is open for the majority of the business week, as opposed to stock trading. Effective trading may become a more viable option for people who work throughout the standard exchange hours of 9:30 a.m. to 4:00 p.m.

How can you get started in forex trading, and which currencies are worth converting? We’ve collected information on six of the most popular and profitable forex currency pairs, as well as tips on how to pick a broker and some fundamental terms you’ll need to know.

What to trade on Forex | Best Forex Currency Pairs

USD to EUR

The euro is a relatively stable currency that represents the EU (European Union) and is the accepted official currency of 19 of the European Union’s 28 members. 

The USD/EUR pair is influenced by regional political fluctuations that affect the prices either of the dollar or the euro in relation to one another. For example, when the ECB intervenes in market activities to strengthen the euro, the dollar-euro cross will fall.

USD to JPY

The Japanese yen (JPY) is the country’s official currency, and it dates back to the Meiji restoration’s attempt to modernize and westernize Japan’s economy. After the end of WWII, the yen lost a large amount of its value, but it has slowly begun to stabilize after reaching a low following the 1973 oil crisis.

The Japanese government places a high value on keeping the yen’s value in order to cultivate a competitive export market. If you hold USD, you may potentially make large profits by capitalizing on these daily fluctuations if you can buy in at the right time.

USD to CAD

As America’s northern fiscal neighbor and one of their most important trading partners, the CAD and USD values are inextricably linked. The Canadian dollar’s value is also heavily correlated to commodity prices.

If you want to convert USD to CAD, keep an eye on the oil price to determine the best time to buy.

GBP to USD

The GBP is the official currency of the UK, and it is used in England, Scotland, and Wales. Despite being an official member of the European Union until the summer of 2016, the United Kingdom never adopted the euro, as most Western European countries did.

The GBP is the world’s third most traded currency, trailing only the USD and EUR. Two major events in the recent decade have had a substantial impact on the value of the pound. The price of GBP fluctuated wildly from 2007 to 2008 due to the global impact of the Great Recession.

The GBP reached an all-time high of £2.10 per $1 USD in 2007, only to plummet to a shockingly low £1.40 per $1 USD in 2008, prompting many traders to cash out their GBP in exchange for the dollar. Though the GBP would recover in the coming years, it would eventually settle at around £1.60 per $1, never reaching 2007 high.

Brexit was the second significant influence on the price of GBP. Brexit caused the GBP to lose nearly 10% of its value overnight, and 20% in the months following the vote, as investors abandoned the pound for more stable currencies in the wake of the negotiations.

USD to CHF

Switzerland’s official currency is the Swiss Franc (CHF). Investors that invest in CHF do so primarily to protect their assets during times of turbulence. The CHF is largely regarded as a “safe-haven” currency.

This means that during times of volatility, the CHF usually gains value while other currencies lose value. On the other side of the scale, when other currencies appreciate, the CHF loses value. Except for the JPY, the CHF appreciated versus all other currencies during the Great Recession.

Because of their low volatility during major market movements, CHF and (to a lesser extent) JPY are two of the most widely traded safe-haven currencies in the world.

AUD to USD

AUD is the official currency issued by the central bank of Australia and the sixth most traded currency pair.

Because of the interdependence of the economies of Australia and Canada, the value of the AUD is closely related to CAD. The AUD is also intrinsically correlated to the commodities market since Australia remains one of the world’s largest exporters of coal and iron ore.

During the 2015 commodity slump, the AUD reached a low not seen since the 1970s. If you want to expect in AUD, you need to keep a careful check on the price of these commodities, which are crucial to the Australian economy.

Final Thoughts

Traders should also be aware that, by necessity, many forex platforms will feature wider buy-sell spreads on most currency pairs overnight. This is due to the reduced transaction volume.

If you are thinking of trading currency pairs overnight, we recommend that you perform your own research beforehand. Only you can determine which currency pairs to trade at night are best for your trading strategy.

Before making any trading choice, review the most recent market news, technical and fundamental analysis, and expert opinion. Remember that previous performance is not a guarantee of future results. Furthermore, never invest money that you cannot afford to lose.

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