Forex gives so many possibilities: a trader can work with shares, commodities, currencies and so on. There is a great diversity in every category, and a trader can choose one or several what he likes the most.
Many traders prefer to work with currencies. All tenders in the forex market are held via dollar (USD). One currency is a product, the other one is money. If you sell one part, you buy the second one and visa versa. If you use a forex forecaster, you can do it automatically.
Imagine such an example: you rent a new car for 2 weeks. In some days somebody wants to buy this car from you but at a higher price, let it be on $4000 more than it costs in a shop. You sell this car. However, you remember, that you must return a rented car. So, you go and buy a new one but the price in the shop is $4000 less than you sold it. So, you return the car and make a good profit.
The same thing happens when traders work with currency pairs. First, they sell a pair before buying it. They sell it when the price is high and they buy it when the price is low.
3 groups of pairs
1) Majors
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Include all pairs if there is a dollar of USA:
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Euro (EUR) + US dollar
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Great Britain pound (GBP) + USD
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Australian dollar (AUD) + USD
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New Zealand (NZD) + USD
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USD + Japanese yen (JPY)
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USD + Swiss franc (CHF)
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USD + Canadian dollar (CAD)
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There is no difficulty to work with them, except USD + CAD, because of a problem to forecast by Forex Advisors, only night scalping will assist to deal with this pair.
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USD/CHF has a weak stability of changing
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USD/JPY requires a more profound analysis
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Central bank intervention often takes place in last 2 pairs
2. Crosses
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Pairs without USD
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Less active
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Australian dollar (AUD) + CAD, CHF, JPY, NZD,
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Canadian dollar (CAD) + Japanese yen (JPY)
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Swiss frank (CHF) + (JPY)
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Euro (EUR) + AUD, CAD, CHF, GBP, JPY, NZD
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Great Britain pound (GBP) + AUD, CHF, JPY
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New Zealand dollar (NZD) + JPY
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Preferable couples are with yen, except with CAD and CHF.
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Crosses have many surprises: not recommended for beginner traders with little experience in technical analyses.
3. Exotics
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All other combinations of currencies like USD + RUB, USD + MXN, CAD + DDK and so on
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Exotics are unpredictable, that is why it is stressful to deal with them
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Experienced traders like taking risks sometimes and choose exotics, but their approach must be rational and they should know for sure what to do.
What currency pairs are effective?
There is an opinion, any currency pair, that shows an intense signal, is good for trading. Some people fall in love with one pair and work only with it. That is not a profitable forex strategy. They limit themselves when ignoring free opportunities.
As a matter of fact, there are so many possibilities. The rules are not different for trading with currency pairs. A breakthrough of the support line is a signal for selling. It is worth finding a real support line and go in a short position after its breakthrough. Beforehand a trader should set a stop loss.
When to trade?
The currency market is of highest volatility in case both London and NY stock markets are open (from 8 am to 1 pm EST). Then after 4 pm EST when New York stock market is closed, forex becomes really slow. But Japan and Australia markets start their work after a couple of hours and the forex is again full of events.
Traders usually follow an economic calendar to have an ability to foresee what may happen in a certain length of time. At the time when the forex is active, all pairs start moving too. What session is open at the moment is not that important. A trader is able to prefer any pair that he supposes profitable.
Everybody chooses for him- or herself what he/she wants to work with. He can work with just one or analyze two or more, if he has appropriate instruments and concentration of attention.
