Forex 101: The best currencies to trade
If you've decided that you want to trade forex, one of the first things you'll have to decide is which currencies you're going to trade.
Whilst the idea of trading currencies from far flung countries may appeal, it's important to weigh up the best currencies to trade.
So which currencies should you stick to?
Read on to find out…
The currencies you should trade
The two most important things you should take into consideration when picking currencies to trade is volume and liquidity.
If currencies trade under a lot of volume, this means they’re very liquid. And liquidity means you can trade in and out of these currencies quickly.
This is why you should consider trading the world’s major currencies and avoid the rest.
The world’s major currencies
The most liquid currencies are:
The US dollar (USD);
The Japanese yen (JPY);
The euro (EUR);
The British pound (GBP); and
The Swiss franc (CHF).
These currencies can handle trade sizes of between $200 and $500 million in the spot forex market.
Other currencies considered majors are the Canadian dollar (CAD) and the Australian dollar (AUD).
The benefits of trading major currencies
By trading a variety of different currency pairs of the major currencies, you can take advantage of their superior liquidity. This makes trading them easier for you as there will be no delay entering or exiting trades.
And by trading the world’s major currencies, you’ll also find the best spreads. This makes it cheaper for you to trade. The major currency pairs have the tightest spreads.
If you opt to trade less traded currencies, the spread will be wider. This means your trade has to perform better just to breakeven.
So there you have it. The best currencies to trade.
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