Currencies, people use them worldwide every day! Some use hard cold cash, others prefer electronic transactions and many times we even need to exchange a currency for another. This creates a huge multi-billion dollar market called the Foreign exchange market or simply called: the Forex Market – on which we also trade binary options. Many brokers offer a variety of currencies to trade and of course you can select whichever currency you like either randomly or for different reasons. Today I will let you know about three of my own favorite currency pairs and my personal reasons for choosing them!
Which Currencies Do You Prefer To Trade? Does It Even Matter?
“Which Currencies do You Prefer to Trade?” This was probably the first question I got from an account manager when I signed up with a broker. At that time I was too new and had no idea why someone would even have favorite currencies to trade. Thus began my research for an answer but it took a while until I really found one. Fast forward to this date, after years of trial and error – It turned out; there are multiple reasons for why people have favorite currencies or assets in general and the answer is YES, it matters which assets you choose to trade. The reasons may differ from trader to trader but let me start by mentioning my current favorite trio before we dig further in why: EURUSD, USDJPY and GBPUSD.
But how come I only trade currencies and not Indices or Stocks you might ask? To be honest, it’s mostly because I don’t have a favorite company that I have studied or like to follow. I am not a fan of Apple who keeps track of when the next Iphone is coming and whether there is a unique feature or whether Elon Musk is going to send a drone to Mars or not. What I’m saying is, if you want to trade any Stocks or Indices, you need knowledge about their performances and overall know the company and market as well. When trading currencies, on the other hand, you need to be aware of global issues which fall under “okane’s fundamental analysis” as explained further below! Based on this, I automatically chose currencies plus I already liked the idea of currency exchange after having to experience it for my travels.
Reason One: Volatility Provides Opportunities
My first reason when picking a currency is volatility and guess what, this is actually a deciding factor for many traders. Volatility means movement and a moving market means trading opportunities. EURUSD, USDJPY and GBPUSD all provide a decent volatility. Since I am an intraday trader with my preferred expiries ranging from 10 minutes to a couple of hours, these assets and their volatility fit my preferences well. The trouble with expiries? Here are a few things to learn on how to choose the right expiry.
Reason Two: Correlation, a Guide for Better Predictions
After mastering the EURUSD, I also wanted a second pair to trade that was not dependent on the Euro. I chose USDJPY, it passed the volatility qualifications too of course but I had a second reason; currency correlation. I have noticed three types of correlation between EURUSD and USDJPY, negative, positive and neutral. Negative and positive correlation are the main types of correlation that help me get better trades. You can see an example of how I do this in this video: Price Action Trading Using Target Lines. As you witnessed in that video, I got two trading setups at the same time. This doesn’t always happen but that is also one of the benefits of trading assets that are correlated in one way or another. GBPUSD also falls into this category. Lately, Brexit happened which means the UK left the EU and as a result, the Euro weakened and fell against the dollar. This is why I also had to keep an eye on the Pound/Dollar while trading the Euro/Dollar as it is currently deciding the faith of the Euro.
Reason Three: Higher Payouts Equal Better Leverage
Despite what the advertisements say, it is always best to make sure you have leverage when trading! Personally, I thought it would be smart to focus on assets with higher payouts. What’s better: an asset that gives you 82% on every win or 70%? I’m sure you can do the math on your own, that’s a 12% higher return! I get 86% on the EURUSD, that’s why I place most of my trades on this pair. A pretty damn good reason huh?
Reason Four: Habits and Known Patterns
My fourth main reason for being a big fan of EURUSD and USDJPY are the chart patterns I have been acquainted with after several years of charting experience. For example, the EURUSD oftentimes reacts to price levels ending with certain digits such as “the famous level 42 or 420” which I have been talking about in some of my videos and even in my trading diary. Other patterns are the retracements, flag or triangle patterns and expiry patterns. Of course, some of these patterns also occur on other currencies too and in the same exact or similar way! However, each currency has its own “feel” and volatility, its own price levels and retracement waves. Therefore, the only way to truly see those “hidden secrets” is to spend enough time studying an asset. Now you know how I learned to predict very accurate support and resistance targets on my favorite assets.
There Is More Knowledge to be found
What is that saying again, “the one who seeks finds”, right? What I mean is, there is a whole lot to discover and it’s up to you to find your own favorite reasons for selecting assets to trade. By now you know that my reasons were mostly related to technical analysis but obviously, you can find patterns as a fundamental trader too! For example, the Brexit I mentioned was news related and meant huge drops on the EURUSD and as a trader, you must adapt to the market as it changes like a fighter meeting a new opponent. Remember practice like Bruce Lee trade like a dragon! Because what you knew yesterday might not work tomorrow so stay updated. Look for patterns, leverage and a decent volatility and be observant on the currency correlation.