Sunday, 28 August 2011

Forex Trading - Understanding All The Major Pairs

If you are just starting out in Forex Trading, then getting to know the 4 major currency pairs is a must. Known as "The Majors" for short, these 4 currency pairs are the most commonly traded pairs in the market and they are also the most liquid. For the uninitiated, the liquidity is being able to convert an asset into cold-hard cash in a quick manner, but without having a large effect on the asset's price. When talking about Forex Trading, liquidity pertains to being able to buy and sell currency pairs with no effect on its price. The more liquid a pair is, the less 'movements' it will make when you buy or sell large orders. Now that we are done with that, let's have a closer look at The Majors:
The Majors 1: EUR / USD
When talking about the most traded currency pairs, EUR / USD tops the list. Not only is it the most commonly traded, it is highly liquid too... making it very suitable for Forex traders who are just learning the ropes or the ins and outs of the market. The average daily range for this pair is 100 pips. While EUR / USD trades actively 24 hours a day and 7 days a week, you want to do your trades on the most action-concentrated hours. This is when US and European banking hours overlap each other. That's around 7AM EST to 10AM EST. If you want to see how the US economy is doing compared to the rest of the globe, checking out this pair is the way to go.
The Majors 2: GBP / USD
Following the Euro vs. Dollar is the British Pound (GBP) vs US Dollar (USD) currency pair. A widely traded pair, it's more volatile than average, and with that in mind, newbies in the Forex Trading industry should steer clear from it until they have gathered some experience. Movements have a daily average of 150 pips up to 200 pips. This volatile currency pair is most active from London open until it reaches lunch time in the UK, which is around 4:30AM EST. Also, it's active during the early hours of the US trading session. That's between 7AM EST up until 10AM EST.
The Majors 3: USD / CHF
On the third spot, we have the US Dollar (USD) vs. Swiss Franc (CHF) currency pair. If you are someone who wants to visually estimate the strength of USD currency, this is a good pair to use or trade on. It often travels at 100 pips daily. This pair is most active during the opening hours of European trading session (that's 3AM to 4:30AM EST) through the early hours of US Trading Session (7-10 AM EST).
The Majors 4: USD / JPY
Last but not the least, we have US Dollar (USD) vs. Japanese Yen (JPY) trading pair. What's interesting about this trading pair is that it has its own 'behavior' if you will. There are times that it will move opposite the direction of other dollar pairs (this is especially true during risk aversion in the markets). It can also become highly unpredictable compared to other pairs. It has a daily range of 100 pips, and it is most active during the opening hours of the Asian session (6PM to 9PM EST) and early hours of US trading sessions.
Article Source:

Article Source:

No comments:

Post a Comment