People who dip into the waters of forex trading deliberate on which pairs to trade. While EUR/USD is usually the first choice, it isn’t the most predictable currency pair, and the noise around it can be very confusing.
Guest Post by Yohay Elam of Forex Crunch – Forex Trading Blog.
New forex traders are usually given the advice to concentrate on one or two currency pairs. The big variety of majors, minors and crosses may be confusing for the new trader.
The rather trivial choice would be EUR/USD. This is definitely the most popular pair in the world. The volume is very high, and you can always trade on it. This is definitely an advantage. The high volume and the great attention it receives make it a relatively predictable pair, which is an advantage as well.
Another advantage that is a result of its popularity is low spreads: forex brokers compete over customers that trade this pair, offering low spreads. As aforementioned, low spreads shouldn’t be the sole reason for picking a broker.
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An additional characteristic that attracts new traders is the vast amount of information about this pair. There are lots of technical and fundamental analyses about EUR/USD out there. You can find loads of economic researches about the Euro zone. The web is packed with monthly, weekly, daily and even intra-day technical analyses of EUR/USD, using different methods. Needless to say, the forex forums also reflect the popularity of this pair, and contain many discussions about the direction of this pair.
Is this information valuable? The information may be excellent, but there’s too much of it out there. A skilled trader will know which resources he trusts, what information is necessary for him, and what’s excessive. A new trader might be overloaded and confused.
The various forex forums can contain excellent information, and are also fun to participate in. But in many cases, people use these forums to dwell upon their losses. Trading alone, and especially losing alone is no fun. It’s very comforting to know that you’re not the only one that was thrown out by a swing, isn’t it?
New traders don’t always know how to separate the valuable data and tips for the noise. In addition, there are more predictable currency pairs. The Australian dollar is one of them: AUD/USD has a better technical behavior than EUR/USD. Also NZD/USD is a more straight-forward pair, and also a slow mover – good for newbies.
Apart from being somewhat more predictable, these pairs are also less “noisy”. You’ll have less people who will talk with you about these pairs. This mean also less people that will comfort you, and less people to comfort. But hey, are you trading for socializing or for profit?