When you are a first-time trader in the forex market, you will likely be confused while choosing the currency pairs to trade with. In the forex market, a lot of different currency pairs are available for trading, and each of them will have unique characteristics, which makes a huge difference to the kind of trading opportunities you get with each of them. Some currency pairs give more trading opportunities than others, while others don’t give as many opportunities but might have a higher potential for profits. The choice of currency pairs is primarily based on the trading styles and risk profile of a trader. However, a beginner may find it difficult to find the ideal currency pairs for trading.
In that case, you can keep reading this article to learn about the best currency pairs for forex day trading and swing trading since they are the most popular forms of trading in the currency market.
How Does Your Trading Style Impact Your Screen Time?
Before we talk about the choice of currency pairs for different trading styles, you need to understand the impact of various trading styles on your screen time. The amount of time you can sit in front of a screen is relevant in forex trading because many traders make the mistake of choosing the wrong trading style without considering the amount of time they can practically devote to trading.
One rule of thumb you should know about trading is that the duration a trade is kept on hold is inversely correlated to the amount of attention a trader needs to pay to place and execute that trade. It means holding long-term trade positions requires less monitoring compared to trades that are held for a short time. Trading styles like scalping require higher focus and attention from the trader as they have to enter and exit multiple trades quickly within a few minutes.
On the other hand, trades that last for several days or weeks do not demand that much attention as you can leave it to your take profit and stop loss levels. You still need to monitor the trade once in a while, but it is way less in comparison to the screen time of a scalper or day trader. You are expected to watch the price charts all day, as you might miss out on a good trading opportunity by a split second if you take your eyes off the screen.
Scalping and day trading are considered to be the most time-consuming trading styles, as the trader needs to keep their eyes glued to the screen throughout the day to find the ideal trade setups. On the other hand, the duration of a trade is longer in swing trading, but you won’t have to spend a lot of time staring at the screen.
Talking about screen time, there are some useful trading tools that you can rely on to speed up the trading process. The most time-consuming part of the trading process is analysis and calculations. Tools like trading calculators surely save a lot of time, for example, you can easily calculate pips that you’ve captured in a trade in your base currency using a pip calculator, and in a similar way, you can find the right margin, position size and leverage, etc., as well. With accurate values at your disposal, you can minimise the risk and trade confidently.
Finding the Most Suitable Forex Pairs for Day Trading
Once you have decided about the trading style and strategy you will be following in the forex market, you can easily find the most suitable forex pairs based on your risk profile. Generally speaking, the major currency pairs are the safest bet for a trader with a low-risk profile as they have high liquidity, making the trading process hassle-free. Major pairs are especially suitable for scalpers and day traders because of the high trade volume, which results in lower spreads.
I would recommend you stick to one pair as trading more than one pair will result in a lot of confusion as we won’t be able to give undivided attention to the trades. Our focus will keep on shifting between different pairs. Those who trade using 1-minute charts mostly choose the EUR/USD pair as it gives more than enough trading opportunities. But sometimes, the pair does not move much and gets stuck in a tight range.
So, in that case, you can try other pairs like GBP/USD, which tend to be a little more volatile. USD/JPY can also be an apt pair for scalping and day trading since it also offers tight spreads and many trading opportunities. But if you are looking to trade slightly longer time frames, like 5-minute to 15-minute charts, consider adding more pairs to your watch list.
If you are someone using automated trading systems or strategies, you can trade multiple pairs without much problems. Use other automated tools like profit calculators to quickly and accurately calculate potential profits before placing a trade. But for manual traders, trading more than one pair with tick charts or 1-minute charts would result in a lot of chaos as you will find it hard to fully focus on each trade within a short span of time.
Another thing to keep in mind while day trading with multiple currency pairs is correlation. Currency pairs can often be correlated to one another by moving in the same or opposite direction. The pairs moving in the same direction are said to be positively correlated, and when they move in opposite directions, the correlation is negative. So, you need to check if the pairs you choose have any type of correlation before starting to trade.
Which Are the Best Pairs for Swing Trading?
Swing traders always rely on daily or hourly charts to look for ideal trade setups, and hence, they can easily trade with multiple currency pairs without spending much time because swing trading does not require as much attention or time as day trading. The daily or hourly charts will show fewer fluctuations than minute charts, and swing traders can easily leave their trades to run longer without worrying.
Now, when it comes to suggesting the best pairs for swing trading, a trader’s level of skills and experience needs to be considered. For instance, newbie traders will find it easier to stick to major pairs as they are less risky and ideal for swing trading. However, traders with more experience or enough skills to trade systematically can consider minor or cross-pairs for swing trading.
Because the cross pairs are also composed of major currencies, they provide enough liquidity to open trades without issues. Minor pairs are also more volatile than major pairs, which may provide better trading opportunities to swing traders. But they are still trading in a safe zone as cross-pairs also tend to be stable.
Now, for traders who have a higher risk tolerance, you can consider swing trading with exotic pairs. Exotic pairs often offer higher profit potential than major and cross pairs due to the high volatility. But one problem that you face while trading with exotic pairs is insufficient liquidity. Exotic pairs have a low trade volume due to their risky nature and high spreads. Hence, the trading process may not go as smoothly as it is with major currencies.
In any case, you must take some time to make sound trading decisions, and you can make the process easier by relying on various advanced and automated tools designed to provide relevant information to traders.
Stick to Your Plan
You can proceed with trading once you are clear about your trading style and currency pair choices. However one mistake many traders make while approaching the market is placing random trades without a plan. Because the forex market is always subject to fluctuations, and the chosen currency pairs may not always give ideal trade setups. And the trading opportunities you see may not align well with your strategy, or they are simply not worth the risk.
But you still end up entering a number of trades out of excitement or desperation. This lack of patience can cost you a lot in live trading. You need to focus on placing quality trades and stop being fixated on the number of trades you enter. Many times, traders end up losing track of their trading plan as a result of their impulsiveness. So, you must stick to your plan and follow a professional and disciplined approach to trading.
I hope this article has provided all the relevant information you need to choose the best currency pairs for day trading and swing trading. Now, one thing that you should not forget is the relevance of risk management in trading because no strategy or technique will lead to desired results without a solid risk management plan to limit losses and maximise profits.