The Authority’ on Price Action Trading. In 2016, Nial won the Million Dollar Forex open positions weekend today Competition. You should use this two-part article series as a reference guide to answer any question you may have about which currency pairs to trade and what times to trade them. The following points will explain which currency pair’s fall into these three categories and the advantages or disadvantages of each.
We are also including silver and gold in this list since they are quoted in U. First off, many of the major currency pairs are correlated in their price movement, meaning they move almost identical to one another. GPBUSD is typically a bit more volatile than the EURUSD, but if the EURUSD is in an obvious up or down trend you can safely assume the GBPUSD is in the same trend, thus we say they are positively correlated. The USDCHF is negatively correlated to the EURUSD, so if the EURUSD is moving higher the USDCHF is most likely moving lower. You will find if you take a EURUSD chart and a USDCHF chart of the same time frame and hold one right side up and one upside down, they will look fairly similar, this is because they are negatively correlated. So what does this correlation business mean to you? It means you need to be careful when making your trading decisions so as to not double up your risk or trade against a position you currently have open.
Similarly, if you enter a long position on the EURUSD and a short on the USDCHF, you are essentially doubling your risk. I have found the USDCHF to be very choppy compared to the EURUSD and GBPUSD, and I rarely trade the USDCHF as a result, I aim my focus on the EURUSD and GBPUSD if I want to trade a European currency against the U. The EURUSD is also the most widely traded pair, and therefore it carries the highest volume of all currency pairs, this also means it is the most liquid, which is another reason I prefer it over its correlated counter-parts. A commodity currency is a name given to currencies of countries which depend heavily on the export of certain raw materials for income.
Australian dollar, Canadian dollar, and New Zealand dollar. Now, I am not advising traders trade all of these crosses, there is certainly a short-list of the crosses that I trade and that I recommend all my students trade. These four cross pairs are the most widely followed and make a nice addition to the major pairs mentioned above. The exotic currency pairs are not the best place to start as an aspiring forex trader, I still do not trade them and there are reasons why. The exotics are much less liquid than the majors and even the crosses. 1 pip, the exotics can have very high spreads that are usually well over 10 pips. There simply is no real reason to worry about or trade the exotics, the majors and crosses provide you with more than enough price action trading opportunities to have a successful trading career.
Now let’s condense this entire article down into some useful information that you can apply immediately to your forex trading routine. Metatrader 4 has many little nuances that a lot of traders are unaware of. F10 you can see all the currencies you follow in large text. You should see a screen appear with some or all of the currency pairs available, and probably gold and silver. This is where you can pick and choose which currency pairs you follow.
You can save multiple watch lists if you want. Hit F10 and a pop-up price menu of your currently opened watch list will appear. This is a handy little short cut that you can use to check the prices of all the instruments on your watch list very quickly so that you don’t have to have the watch list window open all the time. This gives you 10 different currency pairs to follow, more than enough to trade with. You really should pick your favorite 4 or 5 of these and follow them very closely and master one forex trading strategy at a time, once you progress you can add all 10 currency pairs to your watch list.
Remember to stay patient and avoid over-analyzing, over-trading, and over-leveraging. Stick to these core currency pairs and master my price action trading strategies and you will be well on your way to becoming a successful Forex trader. Stay tuned for next week’s follow-up to this article where we will discuss the best times to trade the Forex market. I would have saved a lot of time, but it never occurred to me that somebody can give the most important things in a simple way for free. In the articles there are things as accurate as arrows in the center of the target. Very useful information that will permit me increase the trading knowledge I need. The concept of doubling the risk is something I was not aware of.
It really really helpful artical . Fantastic explanation you are a star. Thanks for some other informative blog. I’ve a mission that I am simply now running on, and I have been on the look out for such info.
Hi Niail, this is another great post from you. You have tremendously helped me on my journey. I just need to make a suggestion, that you recommend a maximum of 2 Pairs for beginners and especially people who find it difficult to multi-task, from my experience trading more than 2 Pairs makes me over trade and lose focus, which can negatively affect your account. Please include that as a warning. Thanks and keep doing the good job. Stay away from USD TRY for shorter term stuff is my advice!