When a beginner approaches Forex trading, they always ask the same question: what are the best currency pairs? The goal is to take the easiest path, find a way to earn money quickly and, if possible, without much effort.
It's the wrong question. First of all, because there isn't and cannot be one pair better than another, as earnings do not depend solely on an intrinsic quality, but rather on external factors. Secondly, because when discussing such a heterogeneous and versatile activity, one can speak at most of adaptability. In a nutshell, the trader should not choose the best pair, but rather the pair most suitable for their approach and investment style. The same logic extends beyond a single pair, see having a preferred market.
Types of Trading
The perspective, therefore, changes. One should not start from the currencies, the object of trading, but from the trader. Before choosing assets, it is necessary to evaluate one's own attitudes. This reasoning can also be done at the beginning, when the lack of experience would seem to prevent a serene analysis of one's own style.
Everything, in fact, starts from the trading profile: the strategy, the techniques and, of course, the choice of assets. There are numerous distinctions that can be made. The most important concerns the time horizon. From this point of view, two styles are distinguished: the "slow" one, characterized by wide-ranging trading and an approach that is at least multi-day; the "fast" one, which often results in scalping. For a look at a different asset class entirely, see how to invest in commodity pairs.
The "Best" Currency Pairs
In the sense of suitable for a style, of course.
Currency Pairs for Slow Trading
For slow trading, it is best to play it safe and focus on liquid, well-known pairs, which are therefore the subject of analysis and interest from investors, scholars, policymakers, etc. The abundance of information is important as it offers resources for an analysis that, having a long time horizon, must be in-depth. The pairs that feature the four majors - dollar, euro, pound, yen - are good in this perspective.
Currency Pairs for Fast Trading
For fast trading, the choice becomes more arduous. The goal is to rely on pairs characterized by non-abundant liquidity and a pronounced subordination to the relative economies, especially if in crisis. Volatility, in these cases, is rather high and can favor an approach dedicated to scalping. Timing also matters a great deal in this context; see the best time to invest. Therefore, the choice should fall on pairs having one, or better two, exotic currencies. From this point of view, there is only an embarrassment of choice. Be careful, though: your broker may not "support" the most marginal currencies.
