You should trade currency pairs that enable you to maximize your strategies to succeed in the forex market. However, selecting a suitable option can be challenging due to the multiple factors. Let us find out how you can choose the rights forex pair.
Selecting the Correct FX Pair – Step-y-Step Guide
Create a Watchlist
First and foremost, you can find your suitable currency pair by creating a watchlist of all your desired options. That will help you concentrate on specific currencies studying them to improve your know-how.
The best thing is some brokers will allow you to create a watchlist of your favorite pairs. Most newbies find it tricky to concentrate as they explore multiple currencies. That comes from the greed to benefit from all price movements in the marketplace.
Your watchlist should include pairs with desirable characteristics. While there’s no rule here, pick Forex currencies that match your preferences.
Review News & Economic Data
After creating your watchlist, you should review economic updates and data related to your basket. The objective is to understand the potential price direction from a fundamental standpoint. You can use macro and micro-economic reports to conduct technical analysis and guide your trades.
Primary factors such as consumer price index (CPI), gross domestic product (GDP), exchange rate, and inflation substantially affect currency movements.
Technical Analysis
Fundamental analysis helps you to understand the FX industry from a broad view. Meanwhile, technical analysis helps to identify the best entry and exit points. Understand the macro and micro-economic conditions before evaluating price charts. That guides you to filter options on your watchlist and trade pairs with matched fundamental and technical analyses.
You can utilize chart patterns, trading theories (Elliot waves, Candlesticks, support & resistance), and indicators to study price charts before executing your trades.
Beware of the Trading Session
The FX market is open throughout the day. Nonetheless, it has different sessions with varying levels of liquidity and volatility in all currencies. When trading in New York & London sessions, top pairs such as CHF and CAD would be more volatile. The same would happen to AUD, NZD, and JPY pairs during the Asian sessions.
