How to choose a currency pair
As in any Forex market, a lot depends on the choice of trading instrument, and unlike real trading, a lot of other indicators are taken into account here, and not just supply and demand.
The approach to selection should also take into account the trading strategy itself that the trader has chosen, and not just the characteristics of the trading instrument.
It is taking into account the Forex strategy that allows you to choose the right pair that gives the maximum chance of success in stock trading.
In addition, many advisors are created for a specific exchange asset; this is also important when making the right choice.
• Scalping and pipsing - short-term trading puts forward a lot of requirements for a currency pair, firstly, a minimum spread, the absence of additional commissions, and high volatility.
As a rule, the most suitable for scalping are: popular currency pairs.
• Long-term strategies - here the size of the spread is not so important, the transaction is held from several days to several weeks, during which time the currency pair will pass more than a dozen points.
Has some significance swap, it is advisable to clarify its meaning before opening a long-term transaction.
For long-term strategies, instruments with a long, stable trend are suitable; almost any currency pair can play this role. Especially if it made a reversal at the support or resistance line.
• On a breakout - we select a pair for which a clear price channel emerges or it is completely in flate. This approach significantly increases the chances of success, since the breakdown causes a really strong event.
• Character - if you are a fan of risky trading, then you should choose the instrument on which the most events occur, which means that sharp trend movements are most often observed.
Typically, this category includes pairs involving the American dollar or euro. For calm trading, pairs for the above-mentioned currencies are suitable.
• Time - you should not think that all trading tools behave the same way without taking into account the time of day; the greatest activity is usually observed during the release of news on the currencies forming the currency pair.
For example, EUR USD is moving more actively on the European and American forex sessions.
Also, when making a choice, one should not forget that the availability of ready-made scripts for its analysis, analysts’ forecasts and, of course, the size of the spread depends on the more popular the currency pair among traders.