What Currency Pairs To Trade?

Are you being patriotic and trading currency from your country of origin? Is that the best way to select the currency pairs to trade? Definitely not.

It is surprising that so many new trades select pairs based on their geographical location. For example an Australian would trade AUD against USD and NZD or even JPY. Someone in Switzerland would be more inclined to trade towards CHF against USD and EUR. Somehow traders believe that their geographical location gives them an advantage over others regarding certain pairs. How much of it is true?

The criteria of choosing a currency pair should be its liquidity, volume and average trading range. A higher value of all three parameters is most desirable. Based on these criteria our choice of pairs are EUR/USD, GBP/USD, USD/JPY,EUR/JPY,CHF/JPY,USD/CHF,USD/CAD and GBP/EUR.

Another important criteria to consider is Spreads. Spreads varies from session to session. If you trading in Asian session then you would find that USD/CAD would have higher spreads compares to US session. So if you are a scalper or your profit target is usually small then wider spreads can take a good chunk of your profits. It is wise to monitor the spreads and analyze to see if they fit your trading style in your preferred trading time zone. You many also perhaps want to consider a commission based broker who offers tighter spreads.