Introduction
Professional forex traders select currency pairs that will give the best results since market behavior, liquidity, and volatility might affect their profits. There are many currency pairs in the forex market; however, there are only a few of them that dominate the whole global market because of their high liquidity.
Major currency pairs are usually traded by experienced forex traders. This is because trading them requires less money. They also have low spreads, smooth price action, and good trade setups.
EUR/USD – The Most Popular Choice
The EUR/USD currency pair is the most liquid forex currency pair in the world. The EUR/USD currency pair is the exchange rate between the Euro and the US Dollar, which are characterized by stability.
Being included in the group of most traded forex pairs, the EUR/USD usually provides:
- Narrow spreads
- Rapid execution
- Good liquidity
- Stable technical setups
Many professional traders favor EUR/USD due to its good performance according to technical trading strategies and stable volatility. This pair can be greatly influenced by economic reports of the Eurozone and the US, which creates a variety of opportunities for trading.
For traders working with money in their trading accounts, the EUR/USD currency pair is the best choice.
GBP/USD – Strong Volatility and Opportunity
Another popular currency pair among professionals that is widely traded is “GBP/USD”, nicknamed “Cable”.
Features include:
- Bigger daily fluctuations
- High liquidity
- Great intra-day trading possibilities
Despite having a tendency towards higher volatility compared to the “EUR/USD” pair, expert traders leverage this volatility in order to make bigger profits.
Being one of the most actively traded currency pairs in forex, “GBP/USD” stays highly liquid during the London and New York sessions. However, careful risk management is necessary when there is significant economic news released by either the UK or the US economies.
USD/JPY – A Stable Market Favorite
The USD/JPY pairing means the exchange rate of the US Dollar versus the Japanese Yen, which is one of the best currency pairs among professional forex traders.
Reasons why traders like USD/JPY are:
- It offers constant liquidity.
- It has narrower spreads.
- Market movements are smooth compared to other volatile pairs.
Traders using funded trading account is very liquid during Asian and American sessions. This pair is also sensitive to interest rate policies and market sentiments.
Funded traders will find that USD/JPY offers an ideal trading environment with less slippage and predictable markets.
AUD/USD – Popular Commodity Pair
AUD/USD consists of the Australian dollar and the US dollar. This currency pair depends on commodity prices, mainly on gold and iron ore.
Professionals prefer trading AUD/USD for the following reasons:
- Its trendiness
- Its liquidity stays at high levels.
- There are opportunities for swing trading with it.
It acts actively in the Asian session and responds to news from Australia and China.
Many professionals trade AUD/USD in order to diversify portfolios without stepping out of the major forex market framework.
USD/CAD – Driven by Oil Prices
USD/CAD is yet another major currency pair that is often traded by professionals. Due to the fact that Canada is an important oil producer, the reaction to the crude oil market is often pronounced.
USD/CAD provides:
- High liquidity
- Trends
- Volatility
The professionals take into account not only US economics but also the price of oil while trading in USD/CAD.
The high activity during the North American session time makes it interesting both for day and swing trading.
Why Professionals Focus on Major Pairs
The vast majority of professional traders prefer to trade in major currencies rather than exotic currencies due to the following benefits of the former:
- Better liquidity
- Smaller transaction costs
- Quick trade execution
- Better prediction ability
Exotics can have more volatility, but usually, there is a bigger bid/ask spread and less liquidity, which makes trading less risky.
Major pairs suit better for steady trading results.
Trading Sessions and Currency Pair Activity
Different currency pairs are more popular at certain times during trading.
London Session
Best suited for:
- EUR/USD
- GBP/USD
- EUR/GBP
New York Session
Most suited for:
- EUR/USD
- USD/CAD
- GBP/USD
Asian Session
Best suited for:
- USD/JPY
- AUD/USD
- NZD/USD
A professional trader is able to adjust his strategy based on the most active trading session for the currency pair he favors.
Choosing the Right Currency Pair
Criteria for choosing the right currency pair include:
- Trading style
- Risk appetite
- Trading schedule
- Experience level
Scalpers tend to go for currency pairs that are highly liquid and with low spreads, while swing traders may concentrate on trending pairs.
Good traders put in efforts to learn how to trade the pair before risking money.
Conclusion
Effective professional trading of foreign exchange markets is closely linked to the choice of proper currency pairs. Currency pairs including EUR/USD, GBP/USD, USD/JPY, AUD/USD, and USD/CAD are still among the most frequently used ones due to their high liquidity and tight spreads.
By learning about the behavior of particular currency pairs during specific trading periods and economic environments, one can increase trading effectiveness and profitability. Trading of highly liquid currency pairs will assist in effective risk management and trading success.