Best Forex Pairs for Beginner Traders

Almost 10 million people worldwide trade forex thanks to the internet, and thousands of beginner traders are entering the markets daily. As such, many want to know which are the best forex pairs that a beginner can and should trade. Let’s find out.

The best forex pairs for beginners are the major forex pairs. A beginner trader should consider four major forex pairs: EUR/USD, USD/JPY, GBP/USD, and USD/CHF. This is because these pairs are the most heavily traded, economically strong, not volatile, and easy to predict.

This article will allow you, as a beginner trader, to see and understand which forex pairs are best to get you on your trading journey. There are literally hundreds of forex pairs, and as a beginner trader, this can be overwhelming, but we look at why you should consider only four.

Best forex pairs for beginners

If you are new to trading and especially forex trading, then you would want to know which are the best currency pairs to trade, along with which is the “easiest,” if there is even such a thing.

Even though online brokers may offer over 100 forex pairs to trade in some cases, this does not mean you, as a beginner, should go and start trading all of them. Moreover, there are only so many that professional traders, financial institutions, and retail traders focus on.

As a beginner, you should focus on the ones these professionals heavily invest in and narrow your field even further to the most popular traded currencies.

Thus, the best forex pairs to trade for a beginner are undoubtedly the major forex pairs. Hence, the best currency pairs that beginners should focus on are the following.

  • EUR/USD
  • USD/JPY
  • GBP/USD
  • USD/CHF

Understanding why these should be chosen and traded as a beginner is what we will detail next, and understanding these elements will help you on your way to being a better trader.

It will help if you consider that currencies hold different statuses, with some being stronger (“valuable”) than others.

In terms of the forex market, there is only a handful that is considered to have this valuable status and are actively traded, and they are the major forex pairs because these currencies are economically and politically stable. Let’s look at the major forex pairs and which are best for beginner traders.

The four major forex pairs

  • EUR/USD
  • USD/JPY
  • GBP/USD
  • USD/CHF

What are the major forex pairs?

The currency pairs that are the most popular (meaning the forex pairs that are traded the most) in the world are called the Major Forex Pairs. These forex pairs account for approximately 85% of the entire foreign exchange market. Due to this, they are considered too, in fact, drive the entire global forex market, and thus are the most heavily traded and exhibit high market liquidity.

The USD (United States Dollar) is considered to be the strongest and most traded currency globally. For this reason, other currencies that are traded against it will make up the majority of the major forex pairs.

How many major forex pairs are there?

Now there are considered to be many major forex pairs; however, the four major forex pairs to date would have to be the following;

  • EUR/USD
  • USD/JPY
  • GBP/USD
  • USD/CHF

These are considered to be the main forex pairs and ones that a beginner should initially start looking at when they are learning to trade. Adding to this, beginners usually start with small accounts meaning they don’t tend to invest a lot when they are learning. The major forex pairs are the default currencies that a beginner with small forex account should trade with. Remember that the forex major pairs are highly liquid and stable meaning they have tight spreads and are perfect for beginner traders.

There are another three currency pairs that many believe should be added to the major currency pairs list, and these are namely;

  • USD/CAD
  • AUD/USD
  • NZD/USD

The Australian Dollar and New Zealand Dollar are considered to be emerging market currencies and investors (in a risk-on situation) like to take long positions on these currencies because of the return they tend to yield. However, as a beginner, these pairs can be overlooked until experience in the forex market, and trading as a whole is gained.

Best major forex pairs for beginners

Let’s now take a look at the four major currency pairs in detail to understand why these should be considered the best forex pairs for beginners to trade.

EUR/USD

The EUR/USD (also known as the Euro against the Dollar) has become the most popular and widely-traded currency pair worldwide, and more than 1/3 (one-third) of the total volume of traded instruments falls into this forex pair.

Its popularity is due to these two currencies coming from the two biggest economies in the world. To understand these two currencies, you should know that the interest rate differential between the U.S. Federal Reserve Bank and the European Central Bank is what affects the value of these currencies.

This is a perfect forex pair for beginners to trade because it is stable, has a high degree of predictability, and the news for these two economies is always easy to come by.

USD/JPY

Next up is the USD/JPY, which is essentially the U.S. Dollar against the Japanese yen. This currency pair accounts for 15% of total forex trading volume, meaning it is highly liquid, and many traders seek it out as an investment.

The U.S. Federal Reserve and the Bank of Japan (BoJ) will influence the exchange rate of this forex pair based on their policy rates.

This forex pair is also considered a “safe haven” for traders when the market seems unpredictable and in a state of unrest (turmoil). This is thanks to the low domestic interest rate that Japan has, which is encompassed by deflation.

In simple terms, this means that when things are looking bad in the market, you should “buy” the Yen, essentially “shorting” the Dollar against it.

GBP/USD

The GBP is second last on our list of the best forex pairs that beginners should consider as it is amongst the top 5 most traded currency pairs in the world. It is not only one of the top 5 traded currency pairs but also accounts for 15% of total traded volume when looking at the entire forex market.

The Bank of England (BoE) and the Federal Reserve will influence the change in the exchange rate between these two currencies.

When looking to trade this forex pair as a beginner, there are two things to consider. The first is that when the U.S. Federal Reserve intervenes in the open market, essentially trying to make the Dollar stronger, the GBP tends to decline against the Dollar.

The next element to consider is that this forex pair tends to have higher volatility when compared to the others, and positions placed on this pair are best suited for short-term aggressive trades.

USD/CHF

Last is the USD/CHF. These are essential, the Swiss Frank and the U.S. Dollar. This forex pair has an inverse correlation (negative correlation) to other currency pairs like the EUR/USD and the GBP/USD. This means that when you see these pairs (EUR/USD and GBP/USD) declining, the USD/CHF will typically rise.

Due to this factor, the USD/CHF is one of the “easier” currency pairs to trade. The Federal Reserve and the Swiss National Bank (SNB) will contribute to the change in price for this currency pair with regard to their interest rate differential.

Take note that other factors will affect the economics of a country, such as employment data, its Gross Domestic Product (GDP), etc., which will, in turn, cause changes to interest rates, thus affecting the price of forex pairs. However, this information is beyond the scope of this article but should be looked at in understanding forex and how to trade.

How many forex pairs are there?

There are approximately 154 currencies that 221 countries use which are listed on the United Nations Treasury list. If we had combined and computed all the forex pair combinations, we would end up with 11781 forex pairs in total.

However, for trading purposes, there are only about 70 forex pairs that traders and investors will take positions on and use for investing. It should be noted that online brokers (depending on who they are and what forex access they have) may offer up to 130 currency pairs that you will be able to trade.

Take into consideration that some of these pairs are emerging market currencies and other cross-currency pairs. Thus, as a beginner trader, you should focus on the ones in which many investors, financial institutions, and retail traders invest heavily (which we have explained to be major forex pairs).

Conclusion

We now know that the best forex pairs that beginner traders should consider investing in are the major forex pairs and, more than that, the four major forex pairs of the EUR/USD, USD/JPY, GBP/USD, and USD/CHF.

This is because these currency pairs make up most of the global forex market and are heavily traded by most professional forex traders and financial institutions. The currencies that make up these pairs are economically stable, not very volatile, and at times easy to predict.

Thus no matter what type of beginner trader you are (whether you thrive with technical analysis or prefer fundamental analyses), these are the best forex pairs to trade and should be considered as a starting point to hone your trading skills.

FAQs

How many forex pairs should a beginner trade?

Although there are four major forex pairs that a beginner can and should trade in order to learn how to invest, only one or two should be traded at a time. It will help if you remember that trading is a skill and is not gambling.

Many subconscious and conscious decisions based on information (news, technical analysis, economics, etc) will play a role in opening a position; your focus needs to be centred.

As such, beginner traders should stick to the EUR/USD or the USD/JPY due to the amount of information and resources that is available for this currency pair.

What are the best Pairs to trade in forex?

The best pairs to trade in forex are the major pairs. Although four are considered to be the strongest, others can be included and offer investors good opportunities. These include;

  • EUR/USD
  • USD/JPY
  • GBP/USD
  • USD/CHF
  • AUD/USD
  • NZD/USD
  • USD/CAD

What is the easiest forex pair to trade?

There are two “easy” forex pairs that you can trade. The first is the USD/CHF. This is because when the EUR/USD and GBP/USD go down, this currency pair goes up due to its inverse correlation to them.

The next is the USD/JPY. The Yen is considered a safe haven, which means that when the markets are in a period of “risk-off” (the markets are in turmoil), traders tend to buy the Yen (short the Dollar against it) due to it being stable.

We will be happy to hear your thoughts

Leave a reply

PIP Penguin
Logo