Best Forex Pairs To Trade For Beginners – Corey Mitchell, Certified Market Technician, is a day trading expert with over 10 years of experience writing about investing, trading and day trading in publications including Investopedia, Forbes and others.
Jafarda R. Brown is a certified financial advisor, financial education instructor and researcher who has helped thousands of clients for over two decades. He is the CEO of Xaris Financial Enterprises and a lecturer at Cornell University.
Best Forex Pairs To Trade For Beginners
The beauty of forex day trading is that you can trade 24 hours a day. Unfortunately, that doesn’t mean you should. Day traders should only trade a forex pair when it is active and has a lot of volume and trades. The EUR/USD exchange rate has certain hours that are acceptable for day trading, as there is enough volatility to generate profits that are likely to exceed the costs of spreads or commissions. In order to be efficient and capture the biggest moves of the day, day traders go even further, often only day trading in a three to four hour time frame.
How To Trade Forex
The forex market is open 24 hours a week because the global market is always open due to time zone differences. However, not every global market actively trades every currency, so different forex pairs are actively traded at different times of the day.
Pairs that include the Euro (EUR) or the British Pound (GBP) are most active when Europe is open for trading. Pairs that include the US dollar (USD) and the Canadian dollar (CAD) are most active when the US and Canada are open for trading.
For daily EUR/USD trading, the pair is likely to see the most activity when the London and New York exchanges open. These markets are open from 0800 to 2200 GMT. Use the Forex market hours tool to view key market hours in your time zone or in a broker’s time zone (chart).
The hourly swing chart shows how many EUR/USD pips are moving each hour of the day (times are in GMT). A significant increase in the amount of motion begins at 0700 and continues until 2000. After that, the hourly momentum starts to slow down, so there are likely to be fewer big price moves for day traders to participate in.
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Day traders should ideally trade between 0700 and 2000 GMT. When trading outside of these hours, the points movement may not be sufficient to cover the difference or fees.
Volatility changes over time, but the most volatile clocks tend not to change much. 0700-2000 GMT will continue to be the most acceptable day to trade, regardless of whether intraday volatility is high or low. Please note that Daylight Savings Time may affect trading hours in your area.
0700 to 2000 GMT are acceptable hours to trade EUR/USD as there is good movement to take profit and cover spread and commission costs. Ideally, you want to trade EUR/USD between 1300 and 1600 GMT daily for maximum productivity. During this period, you will see the most daily changes, which means more profit potential, while spreads and commissions will have the least impact on potential profits.
London and New York are open in this three-hour window. This means that there is a lot of volume from the two main markets, so the price difference is minimal during this period.
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Volatility varies not only during the day, but also over longer periods. To understand intraday volatility, you can use indicators such as Average True Range (ATR), which measures volatility based on recent time periods.
When the Federal Reserve raises interest rates, that means investors can get a higher return on their dollar deposits. Investors and traders will find the US dollar more valuable compared to other currencies that have not appreciated. In other words, the euro will lose value against the dollar.
When you visit a website, Dotdash Meredith and its partners may store or retrieve information on your browser, usually in the form of cookies. Cookies collect information about your settings and devices and are used to make the site work as you expect, how you interact with the site, and to display ads tailored to your interests. You can learn more about our use, change your default settings and withdraw your consent, which is valid for the future, by visiting the cookie settings, which you can also find in the footer of the website. Whether you’re new to the forex market or a seasoned trader, you’ve surely come across the concept of leverage. If you are new to forex trading, you may be wondering what exactly this term means. In this case, I recommend reading the article “What is leverage?”
Since leading brokers around the world offer different leverage ratios, here we will review the main points of trading this financial instrument and try to answer the question, what is a good leverage ratio? But first, let’s define a basic concept.
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Forex leverage is the amount of trading funds that the broker is willing to lend to your investment based on the ratio of your capital to the amount of credit funds.
The total amount of leverage provided by the broker is not fixed. Brokers set their own rates, which in some cases can reach 1:100 or even more. Forex leverage is usually expressed as a ratio. In this example, this means that with $1 of stock, you can open positions up to $100.
Let’s find out what the best leverage level is for a beginner. Many newbies are attracted to leveraged income strategies because they want to earn more money in a shorter period of time.
However, remember that leverage comes with risks. At a minimum, you should understand concepts directly related to money management in leveraged trading, such as:
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For example, a trader with only $1,000 in his account can actually trade $50,000 with 1:50 leverage or $100,000 with 1:100 leverage in the forex market. Simply put, this trader risks losing $1,000 of his capital, but if he succeeds, he will make $100,000 if the position is opened with 100% margin and 1:100 leverage.
For example, if your account balance is $1,000 and you are using 1:100 leverage, you will actually have $100,000 to manage. This means you have the opportunity to open more trades in different trading instruments and use hedging techniques to further protect against risk (hedging and its strategies are discussed in detail here). This allows you to diversify the portfolio, reduce risk and increase the probability of profit.
Let’s look at this advantage using the previous example – you have $1000 in your account. Let’s say you don’t use leverage. That means you trade 1:1.
In such a situation, at best you can open a position with a minimum amount of 0.01 and you will not even have on the EUR/USD pair.
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This is because in forex, a lot is usually 100,000 currency units. In other words, you need $100,000 * 0.01 * 1.17470 = $1174.70 to open at least one position in one of the most traded pairs in the forex market, EURUSD.
With $1000 in your account and no leverage, you cannot open small positions. However, because of the high leverage, even people with a small deposit of $50-100 have the ability to access the art of trading and trading at the level of professionals.
In the past, when brokers did not offer leverage, the only option for leveraged trading was to borrow a very limited amount of funds from a bank with high interest rates, huge collateral and guarantees.
Faced with serious competition, Forex brokers offer high leverage to attract clients with very low deposit amounts and minimal commissions. If you trade during the day, using leverage will be almost free. If you decide to trade overnight, consider SWAP, which is an overnight broker commission.
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The growth of high-risk traders’ deposits can easily reach 300-500% profit per month, which is much more than any bank. 5. Convenience
It is important to understand that the main income of a good broker comes from commissions for opening trades, SWAPs and spreads. Therefore, it is very important for the broker that each client uses his services as much as possible, succeeds in trading and becomes rich. A decent broker does not need to spend his entire deposit and vow never to trade forex again.
Therefore, in the conditions of high competition, forex brokers provide an opportunity to choose financial leverage in favorable conditions with low interest rates, flexible rate schedule and minimum commission. Often, reputable brokers even offer the services of a personal manager. A personal manager will help you understand all the nuances, choose the optimal leverage and balance the trade.
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