There are many Forex pairs that you can trade and make profits with, but have you ever wondered why there are all these pairs in Forex and which Forex pair you can trade? In this article, we will explain in detail what Forex pairs are, their function, how to trade them, and the most important factors of strength and weakness that affect each pair.
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1 – Types of forex Pairs
In the Forex market, Forex pairs are divided into several sections, based on their importance, strength, and popularity in the Forex market among traders.
– Major Forex Pairs
There are major Forex pairs that are traded by a large number of traders, and the other reason that makes them major is their stability and ease of analysis because when you analyze a pair, you want to understand its movements and reap the fruits of your analysis, and these forex pairs It may greatly help you achieve this.
major pairs
EUR/USD – Euro / US Dollar
The first pair is the Euro vs the US Dollar, nicknamed Fiber. This pair is very popular among traders because it is easy to analyze and respects most schools of analysis such as technical analysis, SMC, harmonic analysis, Gann angles, etc. The EUR/USD pair moves daily by approximately 60 to 100 pips and in the week by 80 to 150 pips.
GBP/USD – British Pound / US Dollar
The GBP/USD pair, nicknamed Cable, is the second strongest pair in Forex pairs, as its movement is very similar to the EUR/USD and moves slightly faster than the EUR/USD. You may notice the movement of the GBP/USD in a week exceeding 150 and 180 points.
USD/JPY – US Dollar / Japanese Yen
The Dollar vs Japanese yen pair, nicknamed the Gopher, is similar in its movement to the GBP/JPY and moves about 50 to 80 pips per day, but something unexpected may happen in this pair and it may move about 300 points in one day because it contains the Japanese yen currency, which is greatly affected by news and moves a large number of pips in a very short time.
USD/CHF – US Dollar / Swiss Franc
The dollar against the Swiss franc and known as (Swissie) You will find that the movement of this pair is somewhat weak, as it moves from 40 to 70 points daily, with a maximum of 100 points per week.
AUD/USD – Australian Dollar / US Dollar
The Australian dollar against the US dollar, also known as the Aussie, has a small movement, as it moves from 50 to 80 pips daily.
USD/CAD – US Dollar / Canadian Dollar
The US dollar Vs the Canadian dollar and its nickname are Loonie, but you will not find many traders using this nickname because it is not well known and usually moves from 50 to 80 points per day.
NZD/USD – New Zealand Dollar / US Dollar
The New Zealand dollar against the US dollar, nicknamed the Kiwi, moves between 50 and 70 points per day.
These are the main pairs that you can trade and that you can easily analyze no matter what analysis method you use in the Forex market.
– Minor Forex Pairs
As for the minor forex pairs, they are somewhat different from the major pairs in terms of their movement and respect for the types of analysis. As we mentioned previously, the major pairs respect the types of analysis. As for the minor forex pairs, you may notice that they ignore the supply and demand zones and trend lines, and they may move many pips in a very short time, but this does not negate the fact that you can trade on them, but with caution and with a strategy appropriate for this type of pairs.
minor pairs
EUR/GBP (Euro/British Pound)
The euro against the pound moves about 40 to 60 points daily, with a maximum of 200 points weekly, and its movement is somewhat similar to that of the EUR/JPY and the GBP/JPY.
EUR/JPY (Euro/Japanese Yen)
The euro against the Japanese yen moves from 60 to 90 pips per day and from 300 to 400 points per week. This means that the movement of this pair is very strong. This is a large number of points that you will not be able to find in the EUR/USD throughout the week.
GBP/JPY (British Pound/Japanese Yen)
The British pound against the Japanese yen moves about 80 to 120 points during the day and 400 to 500 points during the week, and its movement is similar to the movement of the EUR/JPY as well.
AUD/JPY (Australian Dollar/Japanese Yen)
The Australian dollar against the Japanese yen has a daily movement of 50 to 70 pips and a weekly maximum of 300 points. There is also a correlation between the GBP/JPY and the EUR/JPY.
EUR/AUD (Euro/Australian Dollar)
The euro against the Australian dollar moves from 70 to 100 pips during the day and its movement during the week reaches 300 to 400 pips.
Why would you choose to trade minor forex pairs and not major pairs? In fact, all of these pairs are available on the platform and you can choose what you want and trade on it, but each pair has its advantages and disadvantages. For example:
If you do not see a good opportunity to enter the EUR/USD pair, you can analyze other pairs or minor forex pairs. You can find golden opportunities that occur once a month or once a year. In this case, it is wise to take advantage of such opportunities and seize them.
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Minor pairs are good at forming price patterns. As you have noticed, their movement is strong and large in a short time, so it is easy to form price patterns for these forex pairs. When you see any price pattern, for example, the head and shoulders, you can decide to enter a trade because in this case, you will be somewhat certain that the pair will move in the direction you want.
– Exotic Forex Pairs
Among the Forex pairs that you may find on the MT4 or MT5 platform, you will find strange and unfamiliar pairs, and you will notice that the chart is somehow difficult to analyze. Do not worry, this is normal, as these forex pairs are moved and affected to a large extent by economic factors and are difficult to analyze using regular analysis tools.
USD/TRY (US Dollar / Turkish Lira)
Daily Movement: Approximately 300-500 pips
USD/ZAR (US Dollar / South African Rand)
Daily Movement: Approximately 200-400 pips
USD/MXN (US Dollar / Mexican Peso)
Daily Movement: Approximately 150-300 pips
These forex pairs will have a very high spread and their movement is not clear, but you have complete freedom to choose whether you want to trade them or not. However, in my opinion, make this option the last thing as long as there are other pairs whose movement you can exploit and make profits from.
How do forex pairs work?
You will find that Forex pairs are two currencies, the first is the main currency (EUR) and the second is the secondary currency (USD), and you will find that the first currency is the currency with a higher value than the second, and the price on the chart shows the difference between the first and second currencies. For example, the price of EUR/USD now is 1.1059
EURUSD
That is, the euro is now worth 1.1059 dollars in the market, and this is what you will get if you want to exchange 1 euro for a dollar in any bank, but you will not get the small numbers, of course, you will get 1.10 dollars, Now you have concluded that these prices are real prices and if you go to any bank you will find that the prices are similar.
What will happen on news time?
This depends on the currency in which the news occurs. For example, if the news is on the dollar currency and the news is positive for the dollar, the EUR/USD pair will fall because in this way the value of the euro will decrease against the dollar and the dollar will be stronger, You will notice a rise in the dollar index, which measures the strength of the US dollar.
The opposite is true if the news is negative for the dollar. You will notice a rise in the EUR/USD pair and a fall in the dollar index DXY.
Why are there two opposite currencies?
It is not necessary to trade Forex pairs. You can trade indices if you want, but it will be somewhat difficult to trade on them because the spread is a little high, and Trading on indices only without using a similar pair will not give you an accurate analysis.
Trading two currencies at the same time is a good thing (Pair) because in this way if you want to buy this pair you will buy the main currency and sell the second currency and you will be able to know what factors may affect the rise of the main currency and the fall of the second currency. For example:
If you want to buy the EUR/USD, you will first open the Euro Index and look for good buying opportunities. Then you will look for news that affects the Euro and see whether it will make the Euro rise or not.
On the contrary, in the dollar, because you will sell it in this case, you will look for selling opportunities that may cause the dollar index to fall, and you will look for news that affects the dollar and see whether this news will cause the dollar to fall or not.
Having two currencies together gives you the opportunity to have a clearer view of what will happen in the market. In this way, you can know what will happen to each currency and what factors affect it negatively and positively. When you do all of this, you will make the most appropriate decision, either to sell or buy or even not to take any action because there is no suitable opportunity in the market.
2 – Choosing the Right Forex Pairs to Trade
Choose the right trading pairs
Choosing the right pair to trade on is very important because when a trader starts in the Forex market, he will choose one or two pairs at most to analyze and trade on so that he does not get distracted. If he chooses a pair that does not suit your method of analysis, you will face difficulty in making profits from it.
Volatility and liquidity forex pairs
First, in order to choose the right pair to trade on, you must know whether this pair has enough liquidity to move or if it is a slow pair because in this case, you will face difficulty in analyzing it. Even if you want to enter the trade, it will not move much to reach the take profit, and it is possible that news will occur while it is reaching the target that will make it reverse this movement and make you lose.
Economic and Political Factors
Is the pair affected by the news a lot? If the Forex pair is subject to news more than necessary throughout the day, then there is no need to trade on this pair because during the news period, you will not be able to enter a trade based on normal analysis methods, but the movement of the pair is controlled by political news and it moves based on that and will completely ignore your technical analysis.
You will find many forex pairs and currencies that have news about them throughout the day. I do not mean the EUR/USD or the major pairs. Naturally, strong and weak news will occur about them daily, but some forex pairs are affected by the news more than necessary and news will occur about them daily throughout the week. This does not leave you room to trade on these pairs. Therefore, the best solution is to completely ignore these pairs and look for others.
Trading Style & Strategy
What is your trading style? Because your trading style determines which forex pairs are right for you. I mean, do you analyze using technical analysis or fundamental analysis? For example, all types of analysis work with the major forex pairs, and you can start with the EUR/USD.
This is the best pair to work on, whatever your trading style is. But if you want to choose another pair to make quick profits, I will advise you to use the pair nicknamed the “crazy” GBPJPY. This pair moves a good number of pips during the week, and if you can analyze the economic news that occurs on it, you will make good profits by taking advantage of these big movements.
Trading sessions
The trading time is very important in choosing the appropriate Forex pairs for you because if you sleep at the opening time of London, this means that the major pairs are not suitable for you because the major pairs that contain the dollar currency move at such times, especially when London overlaps with New York.
If you prefer to trade in the Asian sessions, it will be best for you to choose the JPY, AUD, and NZD pairs, as these pairs move well at the start of the Tokyo session, and you can also take advantage of the New York session.
If you want to trade in the major pairs but will not be able to be in front of the chart in the New York and London sessions, you can place pending orders in the Levels you want, and thus you will seize the largest amount of opportunities so that you do not lose anything.
You can find out the opening and closing times of the sessions according to your local time from the Forex Factory here.
3 – Forex pairs correlation
There is a correlation between Forex pairs with each other, and this correlation is a means of entering trades. There are traders who use this correlation as a basic strategy for them. For example, there is a positive correlation between these pairs.
EUR/USD and GBP/USD
USD/JPY, EUR/JPY and GBP/JPY
AUD/USD and NZD/USD
Some pairs have a negative correlation with each other, if one of them moves up, the other one goes down, but they do not necessarily have to be similar in the same number of pips, such as:
EUR/USD, USD/CHF and DXY
GBP/USD and USD/JPY
AUD/USD and USD/CAD
When choosing forex pairs, you should take the correlation of the pairs into account and not ignore this matter because it is very important and is a basic aspect of the analysis. For example, if you want to choose the EUR/USD pair, you can also take a look at the GBP/USD so that you can get a clearer picture of what is happening in the market, for example.
EURUSD and GBPUSD correlation
In this example, the EUR/USD is at the top and the GBP/USD is at the bottom. You will notice that when the price fell strongly, it reached a good demand Zone and the EURUSD pair respected it and was unable to break it. However, if you look at the GBP/USD, you will find that this area was already broken and the pair did not respect it at all and continued to fall until it reached the area it wanted at the EUR/USD.
In this case, do you think the decision to enter the trade is based on which of the two zones? The EUR/USD has a supply area that the price has not yet reached, and when it reached it, an hourly candle closed above this level, and the GBP/USD did the exact opposite and did not respect it, so the decision to enter the trade will be better if its on the EUR/USD. Thus, you will have a clearer vision of what is happening in the market when merging more than one pair on the chart, and you will make logical decisions in this way.
On the contrary, in a negative correlation, you can look at the opposite pair in the movement to see better areas to enter your trades from.
EURUSD and DXY
You can add the “DXY” dollar index so that you can identify important areas that the pair may respect and that you may have difficulty finding on the EUR/USD or GBP/USD forex pairs.
In this example from the same area that we have previously identified, we find that the dollar index DXY has risen strongly at the time of the news, and somewhat the pips it has risen are slightly higher than the pips it has fallen in the EUR/USD. Do not forget that we are now talking about a pair that moves in the opposite direction of the dollar index because the dollar index is the second currency in the EUR/USD.
DXY ignored the zone from which the EUR/USD bounced, but he was targeting an area higher than it in order to keep pace with the EUR/USD movement. In this case, it is better not to enter a direct trade when the EURUSD reaches the area from which it bounced, and to wait in the event that the Dollar Index reaches this area in order for it to be a strong signal for the Dollar Index to fall and the EURUSD to rise.
One of the strategies that traders use to exploit this correlation between forex pairs is to open hedge orders on pairs by opening buy orders on one pair and opening Sell orders on the other pair with a Negative Correlation.
It is possible to use this method to maintain the profits you have achieved or protect your account from loss in the event that you see that the price is moving in the opposite direction of what you wanted, so you open a trade opposite to the one you had previously opened on a pair with a negative correlation.
Conclusion
Forex pairs are one of the most important things that you should know when joining the Forex market because Forex pairs have many secrets that have not been revealed yet and it is important to know the correlation between the pairs with each other. This will help you improve your performance in the analysis and you will notice many trades that you can exploit and achieve good profits from them.
