Best Currency Pairs For Forex Trading

There are two factors that you need to take into account when considering which are the best currency pairs for forex traders to use. The first factor is activity and the second is systems.

1. Most Active Currency Pairs

When you are beginning forex trading you will often be advised to start out with the currencies that are traded most. One reason for this is that high liquidity means that your stops will more often be met without slippage. Another reason is that costs tend to be low. So many people in the market creates a tighter spread, and there is also strong competition between brokers, keeping fees down.

You may be surprised to hear that the trading floor with most activity is not New York, but London. Despite the fact that the US dollar is the most heavily traded currency, London beats New York for the actual volume of trading.

So does this mean that the British pound and the US dollar would be the most active pair? You might think so, but the answer is no. The euro has a much higher volume of trades than the pound. So EUR/USD is the most heavily traded pair, even on the London trading floor.

In fact the Japanese yen also beats the pound. Globally the three most traded pairs are EUR/USD first, USD/JPY second and GBP/USD third.

2. Currency Pairs And Forex Trading Systems

The level of activity in various currencies is probably the most important factor in deciding which pairs are best to trade if other things are equal, but in some cases you will have a system that depends upon other criteria.

If you prefer automated systems, you will probably find that your software is set to work with a small number of pairs and the most active will not necessarily be the best choice. For example, you may know that the best selling forex robot FAP Turbo is set to trade EUR/GBP and EUR/CHF. The more active pair here is EUR/GBP, but most users have found that they get better results with EUR/CHF. In fact, many FAP Turbo users are now only trading EUR/CHF with this robot.

The bottom line is that if you already have a profitable system that is designed for a certain currency pair, you should stick with that pair. You cannot assume that your system will work equally well for other currencies, although you could go ahead and test it if you want to know if it will work with a more active pair.

However if you are developing a new system, and certainly if it involves scalping, you can usually get the most liquidity and trading opportunities together with the lowest costs by working with the most active forex currency pairs.