The Forex Nitty Gritty

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Best Currencies to Trade in Forex

Posted by TFNG Admin On December - 10 - 2013  
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It is, or should be, obvious that the best currencies to trade in Forex are those that will make you the most money. With the use of an alert service one can spot the best currencies to trade in Forex based on market volatility. However, the best currencies to trade must also be those which trade in high liquidity, high volume, and with transparency. Technical analysis of Forex pairs is easier and commonly more profitable in the major currencies. Fundamental analysis of Forex pairs is also more accurate in the major currencies making these the best currencies to trade in Forex.

Majors versus Minors and Technical Analysis

Technical analysis in the Forex market is a statistically based operation. A given price pattern can be highly indicative of a coming price increase or fall. In a sense history repeats itself and Forex technical analysis uses the past to predict the immediate future. Statistics work better when the numbers are larger. Thus technical analysis of major pairs is more accurate than technical analysis of minor Forex currencies. There is more money in the major currencies which increases the amount of trading but because better analysis begets better results this also increases the trading volume, liquidity, and profit potential.

Major Forex Currencies

In general the best currencies to trade in Forex are the majors. This are:

  • United States Dollar, USD
  • Euro, EUR
  • British Pound, GBP
  • Yen, YEN
  • Swiss franc, CHF
  • Canadian Dollar, CAD
  • Australian Dollar, AUD

These currencies are most traded and are tied to strong economies. Because of their high trading volume technical analysis of major Forex currencies tends to be much more accurate and more likely to lend profits to Forex technical strategies than with minor currency pairs.
Here are the top fifteen currencies by percentage of transactions in which they are traded.

Top Fifteen Currencies by Percent of Daily Trades, 2010 Data

Currency

Percent of Daily Trades

US Dollar

85

Euro

39

Yen

19

British Pound

13

Australian Dollar

8

Swiss franc

6

Canadian Dollar

5

Hong Kong Dollar

2

Swedish Krona

2

New Zealand Dollar

2

South Korean Won

2

Singapore Dollar

1

Norwegian Krone

1

Mexican Peso

1

Indian Rupee

1

As we see from the preceding information, the USD dollar is used in nearly half of all Forex trades. Part of this is because many minor currencies only trade versus the US dollar. As such, one trades minor currency A for US dollars and then US dollars for minor currency B. Within the major currencies there can be substantial price action. The fundamentals are easier to read because the economies of Europe, Japan, the USA, Canada, Australia, Great Britain, and Switzerland are highly developed and facts are relatively easy to come by. There may be significant price action in minor currencies but one commonly needs to have inside information in order to make an informed decision as to which trades to make and when to make them. The best currencies to trade in Forex are the ones that combine the best profit potential with the least risk of loss.

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    Disclaimer - Forex, futures, stock, and options trading is not appropriate for everyone. There is a substantial risk of loss associated with trading these markets. Losses can and will occur. No system or methodology has ever been developed that can guarantee profits or ensure freedom from losses. No representation or implication is being made that using this methodology or system or the information in this site will generate profits or ensure freedom from losses.

    HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN OR MENTIONED.

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