Becoming a forex trader means you'll be participating in the largest exchange market in the world, with a billions of dollars being traded on a daily basis. In the forex market, currencies are traded against each other for astounding amounts of profits. Currencies are exchanged in what are called pairs, and they are purchased under the assumption that one legal tender is going to strengthen against another. If the trader is right they make a profit, however similar to the stock market, if they are wrong they could take a loss. Some currency pairs are traded more often than others because of their tendency to return profits more frequently. The following information outlines some of the most commonly traded notes in the market.
Commonly Traded Currencies
The most commonly traded single currency is the U.S. Dollar, probably because it is most of the world's reserve currency and is used to denote the value of natural resources like gold and oil. The size, power, and overall stability of the United States economy makes the US dollar an attractive choice for many investors. Other legal notes that are very popular in the market are the Euro (EUR), Canadian Dollar (CAD), British Pound( GBP), New Zealand Dollar (NZD), Swiss Franc (CHF), Japanese Yen (JPY) and the Australian Dollar (AUD). All of these money are historically successful and reliable in the global market, which is why they are commonly included in the most popular forex trading.
Most Commonly Traded Forex Pairs
Most brokers and firms set the tightest spreads on pairs that include the aforementioned money because they tend to offer the greatest profits due to their stability and consistency. The following lists outlines the 7 most popular forex trading pairs in the world:
• EUR/USD (Euro/Dollar)
• USD/JPY (Dollar/Japanese Yen)
• GBP/USD (British Pound/Dollar)
• USD/CHF (Dollar/Swiss Franc)
• AUD/USD (Australian Dollar/Dollar)
• USD/CAD (Dollar/Canadian dollar)
• NZD/USD (New Zealand Dollar/Dollar)
Somewhat Common Pairs
The above are by far the most common, however any combination of the most commonly traded money is a popular trading pair in the market. In particular, the following 11 pairs make up a large majority of the exchanges conducted by traders:
• EUR/JPY
• EUR/CHF
• EUR/GBP
• AUD/CAD
• GBP/CHF
• GBP/JPY
• CHF/JPY
• EUR/CAD
• AUD/JPY
• EUR/AUD
• AUD/NZD
When traders choose one of the above they are greatly reducing chances of taking a loss due to the tight spread that these pairs often have. The spread, also called PIP spread, is the difference between the buy and ask price, and is directly related to the amount of risk each pair represents at the current time.
Conclusion
Although the aforementioned are certainly the most popular in the forex market, a lot of money is made on other less known pairs on a daily basis. If you want to maximize your profit earning potential you need to consider every possible one, preferably with the help of a robust and powerful software that aids in statistical analysis. Many of these software will make automated recommendations based on market analysis, thereby greatly reducing the amount of research required to find the most profitable trades regularly. If you want to make the most money with trading you'll need to start by investing in safer currency pairs like the ones mentioned above, and then diversify your investments into riskier, less obvious trades as you gain experience.