Best Currency Pairs for Forex Trading: A Complete Guide

2/13/2025, 2:50:41 PM

Best Currency Pairs for Forex Trading: A Complete Guide

The Forex market is one of the largest and most liquid financial markets worldwide, with a daily turnover exceeding $7 trillion. One of the most important decisions for a trader is to pick the right pairs to trade. Correct choice can reduce your risk and maximize your trading potential. This guide explores the best currency pairs to trade with key factors to consider when trading them effectively.

We also discuss how FundingPips eases your trading journey by reducing your risk to a minimal level.

Understanding Currency Pairs in Forex

Currencies are quoted in pairs in Forex trading. The first currency is called base currency, and the second is called quote currency. For example, in the EUR/USD pair, EUR is the base currency, while USD is the quote currency.

Currency pairs are categorized into three types:

Major pairs: These include the US dollar and are highly liquid. Examples are EUR/USD, GBP/USD, USD/JPY, USD/CAD, USD/CHF, AUD/USD, and NZD/USD.
Minor pairs: These pairs do not have USD. They are less liquid and may have higher spreads. For example, EUR/GBP, AUD/CAD, GBP/JPY, etc.
Exotic pairs: These pairs include one major currency with one currency from emerging markets like EUR/ZAR, USD/TRY, EUR/SGD, etc. These pairs have high spread and volatility.

Top 5 Major Currency Pairs for Trading

Though dozens of currency pairs are available, few stand out due to lower trading costs and higher liquidity. Here are our top five pairs to trade:

EUR/USD – Most Traded Pair

The EUR/USD pair has the tightest spread, making it ideal for all traders. The European Central Bank (ECB) and the US Federal Reserve influence the pair. With its stability and predictability, traders prefer short-term and long-term strategies.

USD/JPY – Safe-Haven Pair

This pair usually has big trend movements. Due to JPY’s safe haven status, the pair makes strong moves when chaotic news from around the world flows. It is affected by the Bank of Japan and US interest rates.

GBP/USD – Volatile Pair

The GBP/USD pair, also known as Cable is among the favorites for experienced traders. The reason is its strong volatility during the London session. The pair is influenced by US Federal Reserve and Bank of England policies.

AUD/USD – Commodity-Linked Pair

The AUD/USD pair strongly correlates with commodities like copper, iron and gold. It is also called a risk gauge asset. If it is down, it shows the risk sentiment is negative. Traders interested in commodities like to trade this pair.

USD/CHF – The Safe-Haven Alternative

The Swiss franc is another safe-haven currency. The USD/CHF remains stable within a small range. It is influenced by American and Swiss central banks and risk flows.

Factors to Consider When Choosing a Currency Pair

The best currency pair to choose depends on how you evaluate the pairs. Liquidity is the most important element because higher liquidity means tighter spreads that eventually lower your trading costs.

Another important factor is volatility. You cannot profit if a currency pair does not move much during the day. For example, AED/USD has no volatility at all. So, it’s impossible to trade the pair.

The next thing is to look at your trading schedule. Pairs with JPY or AUD currencies tend to perform during the Asian session, while GBP and EUR pairs are volatile during the London session. Similarly, the CAD and USD pairs move during the New York session.

Best Currency Pairs for Beginners

Now, let’s talk about which currency pairs pose less risk and are suitable for beginner traders. Here they are:

EUR/USD – The Safest Bet

With the lowest spreads, like less than a pip, EUR/USD offers the lowest cost of trading. Due to its popularity, you can find scores of strategies and resources related to the pair.

GBP/USD – A Good Learning Ground

Though GBP/USD is a bit more volatile than the EUR/USD, it also has low spreads. It is useful for beginners who can manage to trade during the London session’s opening hours.

Why Beginners Should Avoid Exotic Pairs

Exotic pairs having ZAR, SGD, TRY, etc., may have very high spreads and low liquidity. Moreover, these pairs move in a wide range and lack a clear trend. Hence, beginners should trade only when they have ample experience to handle them.

Tips for Trading the Most Popular Pairs

Here are some practical tips for trading the most popular pairs mentioned above.

Technical Analysis

Traders may begin with an easier technical analysis mode, which includes moving averages and oscillators. It is always better to deploy one tool to analyze and forecast and another to confirm your analysis.

Risk Management

Without effective risk management, your trading will remain vulnerable. You should not risk more than 2% capital in each position. Always use a stop-loss to mitigate your risk, and use position size based on your risk tolerance.

Staying Updated on Economic News

As part of trading, you should be well aware of the economic news like central bank decisions, inflation, GDP, employment and other important metrics. These economic factors often set the trend of a currency pair. Hence, you cannot ignore them.

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Conclusion

Picking the right currency pair is important for a trader. The major pairs offer low spreads and high liquidity. They have ample liquidity for the traders to slice their profit from the market movements. Getting acquainted with technical analysis and economic news and deploying strong risk management can let you perform better in the markets.

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