Before diving fully into the fast-paced world of forex trading, one will need to understand the most commonly traded currency pairings. Here are five of the most widely traded currency pairings in forex.
The EUR/USD currency pair has a negative correlation with the USD/CHF currency pair and a positive correlation with the GBP/USD currency pair. This is owing to the euro’s, British pound’s, and Swiss franc’s positive correlation.
The GBP/USD pair has a positive connection with the EUR/USD and a negative correlation with the USD/CHF. This is because the British pound, Swiss franc, and euro all have a positive correlation.
The USD/JPY has generally been the second most commonly traded pair. Political tensions between the United States and the Far East have been a source of concern for this pair. Because the US dollar is the base currency in all three pairings, the pair tends to be favorably connected with USD/CHF and USD/CAD.
The USD/CNY currency pair symbolizes the exchange rate between the US dollar and the Chinese renminbi, also known as the yuan. It has accounted for around 4% of daily FX trades in recent years.
Because the US dollar is the quote currency in these other pairs, the USD/CAD currency pair has a negative correlation with the AUD/USD, GBP/USD, and EUR/USD currency pairs.
It’s important to remember that the ideal forex pairs to trade rely on a variety of criteria, including the trader’s preferred time of day, whether they want to make a long-term possible investment for higher earnings or are content to scalp possible smaller profits numerous times per day. A trader’s understanding of currency, forex markets, and worldwide economies is also crucial. Forex trading has the potential to generate a sizable profit or loss, but it takes patience and ongoing research.
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