How do you find the best Forex pairs to trade? This is an excellent question by one of our subscribers. Check out this video where we will explore how to find the best Forex pairs to trade, as well as building a Forex watchlist!
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How to Find the Best Forex Pairs to Trade – Script
You may already be aware that I started trading the US stock market before I switched to trading Forex. When I switched to trading Forex, I applied everything that I learnt trading the stock market to trading Forex. However, I found a gap in my knowledge when I tried to find the best Forex pairs to trade.
From a combination of research and trial and error. I found a few different ways that you can use to find the best Forex pairs to trade and that’s what we’re going to dive into in this video.
So let’s start with tip 1…
1. Stick with the major currency pairs
There are a lot of currencies that you can trade, as well as different currencies being paired together. But there are major currency pairs and these are generally the most popular currencies worldwide. Therefore they tend to get a lot of volume and liquidity. Which can provide potential trading opportunities.
The different major currency pairs include:
EURUSD
USDJPY
GBPUSD
AUDUSD
USDCHF
USDCAD
Theses are not necessarily the best Forex pairs and only pairs to trade every day. However, as I previously said, they are very popular and can provide a lot of volume. I find that these currency pairs make a good starting point. Whereby you can analyse these pairs on your watchlist and see if there are any technicals.
I prefer using the watchlist that I have with TradingView. TradingView is a brilliant charting platform which also provides the ability to keep a watchlist. I can monitor these major Forex currency pairs on my watchlist via Tradingview each day, to see whether any patterns are forming. Or whether there are potential breakouts.
Click here to check out TradingView and start a free trial today!
2. Most Popular Currencies
Slightly different to tip 1 as we are not looking at currency pairs, we are looking at the actual currencies themselves. Whereby you can choose which currencies to pair against which. There are 8 different currencies which are:
USD
EUR
AUD
CHF
CAD
JPY
GBP
NZD
Similar to tip 1, you can keep a watchlist containing a combination of the most popular currencies. Whereby you can check them each day and monitor technicals for any potential trading opportunities. Again, because these are the most popular currencies, they do tend to get the most volume.
Furthermore, they do have the most liquidity. Also, I find that practice and experience brings familiarity with the movements of the different currencies.
E.g. EURUSD doesn’t tend to be as volatile compared with the GBPUSD which can give big moves.
3. Fundamental Analysis
Fundamental analysis can also help you to find the best Forex pairs to trade.
Fundamental analysis – Predicting price movements based on economic data and news releases.
E.g. if you are aware that there is news for a certain country. Then it may be worth monitoring that countries currency in a couple of different pairs. The same as if you are aware of any economic data, then it is good to monitor the currency that the data corresponds with.
I like using Forex Factory to monitor any breaking news, upcoming news or economic data. It is a handy website including a breakdown for the different countries and it is a free tool which is a bonus.
4. Technical Analysis
Technical analysis is my favourite way to find the best Forex pairs to trade, in combination with the above points. Because I am a trader who focuses more on technical analysis rather than the fundamentals.
Technical Analysis– Predicting price movements from price action using charts and charting tools.
With technical analysis, it can be useful to continuously observe certain pairs. Because they may not be ready straight away for a trade, although over a period of days, interesting patterns can form leading to breakouts.
Carrying out technical analysis is extremely important before trading. In particular;
- Identifying any trends
- Identifying support, resistance and pivot points
- Highlighting any trendlines
- Identifying any channels
These can lead to potential entries, targets and exit points in a trade. Also, it is important to note that when price action breaks these points on a chart, then it can make some big moves and the power of technical analysis is not to be underestimated.
Again, keeping a daily watchlist is useful for finding Forex pairs to trade, as it allows you to save any analysis from the charts. Click here to create your own watchlist with TradingView.
5. Currency Strength Meter
There are different versions of a currency strength meter available from different website online. Some are paid and some are a free service. A currency strength meter shows the strengths and weaknesses of different currencies.
E.g. From loading up a currency meter you can see which currency is the strongest at that time, and which is the weakest. Naturally, you can pair the two currencies for either a long or short if it matches your strategy.
I like to use the free currency strength meter available on the website Live Charts. This is useful as a reference to give an indication of the popularity in the currency market. Furthermore, it can give a starting point to check out certain currencies for technicals analysis or any news.
It is important to be aware that there are different ways to analyse the currency strength mater, based on the timeframes that you are using. Some websites share the currency strength meter based on different timeframes.
E.g. USD may be strong on a 15-minute timeframe. However, it may be weak on a 4 hourly or daily timeframe, therefore it could be making a short term correction, before making a further move lower.
As a result, it is good practice to check all timeframes for confirmation, to identify a trend. If you recognise a short term pullback, then you can tailor your trading strategy accordingly, so that you are not expecting a huge range.
That’s why I always carry out technical analysis before a trade. Because I personally find charting to be the strongest confirmation for me to take a trade. Whereby I would never take a trade based entirely on the currency strength meter, but it can give direction for potential trades.
How to Find the Best Forex Pairs to Trade – Conclusion
- Focus on the major currencies
- Focus on the major currency pairs
- Fundamental analysis
- Technical analysis
- Currency strength meter
I personally use a combination of all of these methods for trading. I hope that this gives you an outline on how to find the best Forex pairs to trade, and a starting point to build your watchlist.
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TRADING SOFTWARE
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TRADING BOOKS
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FURTHER READING
How to find the best stocks for day trading
Trading View Tutorial for beginners
Day Trading Setup for Beginners
I hope you found this article useful!
