The forex market trades 24/7 from Sunday night to Friday night, allowing currency trader to maximise their trade time across time zones from Tokyo to London and New York. One of the most popular ways to forex trade is through popularly traded currency pairs.
What are currency pairs?
Currency pairs are used to measure the value of one currency against another. Each currency has a bid and ask price, defined by how much traders are willing to pay for a currency. Essentially, currency pairs are traded in an attempt to profit from the fluctuating values of global currencies.
The five most popular currency pairs for forex trading
The below pairs outline some of the most popular currency pairs in forex trading.
Commonly known as “The Gopher”, the combination of the US dollar and Japanese Yen is one of the most favoured currency pairs in the world. This is mostly due to the Yen’s prominence across Asia and the Dollar’s worldwide.
Large volumes of the pair can be obtained easily, with little fluctuation. It also has a tight spread within forex trading, reducing costs for traders.
Referred to as “The Fiber”, the Euro and US dollar currency pair is considered the most traded. Much like The Gopher, this pair enjoys very low spreads, high liquidity, and the ability to place large volumes of trade.
The two markets are usually very stable throughout the year, helping forex traders to minimise risk when working with the US Dollar and the Euro.
Frequent fluctuations of in price, exchange rate, and interest rates make “The Cable” a particularly volatile currency pair. Made up of British Pound sterling and the US Dollar, the pair can provide great gains for the daring forex trader, but also accrue huge losses if not traded well.
The combination is mostly favoured by day traders who dip in and out of its fluctuations with quick and precise pacing. Which makes it a great pair for swing trading, a form of short-term forex trading strategy.
The combination of the Euro and British Pound sterling is often called “The Chunnel”, a charming reference to the underwater tunnel that connects the UK with Europe. Typically, the currency pair is viewed as very strong, due to their trade links and proximity to one another.
However, the pair has become volatile in recent years due to the Brexit situation and ongoing trade negotiations. The pair is also dependent on interest rates of their respective banks, making them volatile in tough economic times.
Switzerland has long been a safe haven for its financial stability, so it is no wonder that “The Swissie” is too. Combining the Swiss Franc and the US Dollar, this pair is often traded during times of market volatility.
It is one of the most stable pairings for forex traders to consider and offers many benefits for traders who are willing to weather market storms.