Forex trading generally involves the buying of one currency in a currency pair and the selling of the other. For instance, if you are trading in EUR/USD, it could mean that you buying EUR through selling USD or vice versa at the current market rate.

Unlike in trading stocks or options, which will usually give you numerous companies which you can trade on, the forex market only has a limited number of currency pairs that you can use. This is why it is important that you are able to choose the best currency pair that will minimise your losses and maximise your gains. Here are some tips and pointers that can help you select which currency pairs to trade on.

First, you need to know the pip spread involved. This is the biggest factor which you need to consider. To define it in simple terms, the spread would be the difference between the selling price and the asking price of a forex currency pair as provided by the forex broker. It is basically the commission of the agent or broker through which the forex trades are made. Naturally, the lower the pip spread is, the better it would be for the forex trader. One of the currency pairs which has the lowest spread would be in EUR/USD, with an average spread of Brand Levitra only around 2 to 3 pips. However, typically, a spread of up to 5 to 6 pips would be good enough for you to consider trading in.

You should also check the liquidity of the currency pair. The more liquid it is, the higher the amount of money which is being traded on that particular currency pair. This means that the currency pair has a lot of movement in the trading sessions. From a day trading perspective, it would be better to trade on this kind of currency, as the trades do not have to be kept open for a long time. Some of the more liquid currency pairs today would include GBP/USD, EUR/USD and USD/CHF.

Lastly, you need to evaluate the behaviour of the currency pairs that you are interested in trading on. Check whether the currency pair moves technically or if it is fundamentally driven.

Today, the most popular currency pairs among individual or private forex traders would be GBP/JPY, EUR/JPY and GBP/USD. Among these, GBP/JPY seems to be the most preferred since it is volatile and strong, meaning you are able to gain more profits. However, you should also be careful when trading with such currency pairs as your losses can also be bigger.

When choosing currency pairs to use in forex trading, it is best to look for one which is showing a sharp and strong signal at the moment. Once you have chosen a currency pair, keep in mind that you should never just stick on that pair for the entire time that you are into Forex trading. It would be advisable to explore the opportunities available in the Forex market to maximise your gains.

Author Bio: Learn about Forex Trading with Knowledge to Action-learn more on their site www.knowledgetoaction.co.uk, via Greg Secker and Knowledge to Action on Twitter or on one of Greg Secker’s specialist blogs.

Category: Finance/Currency Trading
Keywords: forex trading, forex broker, metatrader, forex, meta trader, metatrader 4, foreign exchange, currency trading