University of Cambridge > Talks.cam > Finance > The 6 Most Profitable Currency Pairs

The 6 Most Profitable Currency Pairs

Add to your list(s) Download to your calendar using vCal

If you have a question about this talk, please contact DELETED.

\

Forex is the largest market in the world that has almost 24-hour volume. Indeed, there are a lot of currency pairs on Forex and it is not always easy to find the most profitable of them. What are the best Forex currency pairs? I could not give you an answer in one line, because it is more difficult than that. Indeed, it all depends on each trader according to his schedule, his strategy, his capital, his psychology, his level of experience etc. A Japanese investor may prefer the yen, while a French investor will prefer the euro over the U.S. dollar.

Whether you’re a beginner or a seasoned trader, you’re often looking for the most profitable currency pairs and you don’t know where to start. And it is true that it is difficult to make one’s choice, but do not despair; there are a few criteria to look at to choose which currency to trade.

In this article, we will divide the answer into several parts. We will see the types of currency pairs (minor pair, major, exotic). I will explain each time the advantages of currency pairs.

What is a currency pair?

When you trade on the exchange rate, you need to know which are the best currencies as an investment and the best Forex broker for you. To find the most profitable currency pairs for you, you will need to find your Forex strategy (I’ve written two articles on it, create a system part 1 and part 2) Choose carefully the pairs and set the best times to trade. If you want to know when to trade,my article is for you.

There is an international code that specifies the configuration of forex pairs. For example, a quote like 1.23 EURUSD means that a euro is worth $1.23. Here, the base currency is the euro and the reverse currency is the U.S. dollar. Thus, each currency pair is registered in currency markets around the world. The price of a quote gives the price of the first currency in the second. The name of the currency pairs comes from the first two letters of the country in question and the third letter is given by the letter of the currency. For example: USD - United States Dollar

The Best Currency Pairs – Majors

  • EURUSD (Euro – US dollar)
  • USDJPY (US Dollar – Japanese Yen)
  • GBPUSD (British pound- US dollar)
  • AUDUSD (Australian Dollar – US dollar)
  • USDCHF (US dollar – Swiss franc)
  • USDCAD (U.S. Dollar – Canadian Dollar)

As you can see, the most important and traded currency is the U.S. currency USD . Due to the size of the U.S. economy, the USD offers very good volatility. This world-leading reserve currency has become the preferred benchmark for Forex trading worldwide.

Be careful, I am not saying that the U.S. dollar is the most profitable currency in the market. I am simply making it clear that it is the currency that offers the greatest volatility thanks to its liquidity and that it is the most common currency in most major Forex pairs.

They are very profitable in the short term

Generally, such pair are the most volatile, which means that price fluctuations inside the day can be the largest. Does that mean they’re the best? Not necessarily because volatility also means higher risk. Your gains can increase quickly, but so can your losses.

The pairs I quoted you just above are the currency pairs with the best trading conditions. This is not to say that major pairs are the best pairs of Forex. Major pairs are the most profitable currency pairs in a short-term trading strategy like scalping. Indeed, thanks to their reduced cost, you will be more profitable faster on your position.

As you will have understood, it all depends on your trading strategy on Forex currency pairs. Major currency pairs are in principle the most profitable currency pairs in scalping. The most traded are actually the major Forex currency pairs, in terms of market volume.

The most profitable minor currency pairs? Here are the minor currency pairs:

  • EURGBP - (Euro – Pound sterling)
  • EURCHF - (Euro – Swiss franc)
  • EURCAD - (Euro – Canadian dollar)
  • EURAUD - (Euro – Australian dollar)
  • EURNZD - (Euro – New Zealand dollar)
  • EURJPY - (Euro – Japanese Yen)
  • GBPJPY - (British pound – Japanese Yen)
  • CHFJPY - (Swiss franc – Japanese Yen)
  • CADJPY - (Canadian Dollar – Japanese Yen)
  • AUDJPY - (Australian Dollar – Japanese Yen)
  • NZDJPY - (New Zealand Dollar – Japanese Yen)
  • GBPCHF - (British pound – Swiss franc)
  • GBPAUD - (British Pound – Australian Dollar)
  • GBPCAD - (British Pound – Canadian Dollar)

They are very profitable in the medium/long term

Not all of these currency pairs have the potential to deliver the best results to traders. Minor currency pairs are attractive to trade if you are a fundamental trader and you are doing a longer term analysis. Scalping on minor currency pairs is more complicated to do. Indeed, the entry fees are higher than for major currency pairs. This is not to say that there are no most profitable currency pairs among minors. The most volatile currency pairs can be profitable if you know how to do an effective risk management and trading plan.

If you want to trade successfully in Forex trading, you need to have a better understanding of the pair you are trading. If you choose any of the pairs, you go straight into the wall. The choice of the most profitable currency pair for you must be based on your knowledge, trading strategy and availability.

The most profitable currency pairs among the minors are those on which the interest rate differential is large. The most profitable currency pairs on long-term strategies are the Australian dollar, the Japanese yen or the Canadian dollar. Beware of Forex broker fees(you need a good Forex broker ). Minors are the most profitable currency pairs, but spreads are among the largest.

This talk is part of the Finance series.

Tell a friend about this talk:

This talk is included in these lists:

Note that ex-directory lists are not shown.

 

© 2006-2020 Talks.cam, University of Cambridge. Contact Us | Help and Documentation | Privacy and Publicity