Common questions frequently asked by forex traders is what the currency pair is the best to trade and when the right time to trade.
In the first part of this article we review the question of what currency is best for trading, and the next article (part-2) would be the right time to discuss forex trading.
Type of currency pairs
There are 3 types of currency pairs traded in the forex market, the major currency pairs (major currency pairs), cross currency pairs (cross currency pairs) and exotic currency pairs (exotics currency pairs). Here's an overview of what the currency pair is included in the three categories and their correlation.
Regarding where the most good for trading is very relative depending on the knowledge and understanding of a trader, but in general that is the most widely traded and liquid lowest spreads.
Major currency pairs
Major currency pairs is the currency of a country that is paired with Ameriks States Dollar (USD Dollar). In addition to currency, commodity traded in the Euro currency and traded by forex traders is gold and silver.
Symbols and designations (in parentheses) for the major currency pairs:
EUR / USD - Euro vs. The U.S. Dollar (Fiber)
GBP / USD - British Pound vs The U.S. Dollar (Sterling, Cable)
AUD / USD - Australian Dollar vs. the U.S. dollar (Aussie)
NZD / USD - New Zealand Dollar vs. The U.S. Dollar (Kiwi)
USD / JPY - U.S. dollar vs. The Japanese Yen (the Yen)
USD / CHF - U.S. Dollar vs. the Swiss franc (Swissie)
USD / CAD - U.S. Dollar vs. The Canadian Dollar (Loonie)
XAU / USD - Gold or gold
XAG / USD - Silver or silver
The correlation between the major currency pairs
The movement of the price of some particular currency pair or correlated interplay. Correlation of currency movements of EUR / USD and GBP / USD is unidirectional or identical, ie the general direction of movement of the price is the same, although not exactly the same. If the trend of EUR / USD rising trend assumption GBP / USD at the same time also increased. In this case the EUR / USD and GBP / USD is said to have a positive correlation or unidirectional. Instead USD / CHF and EUR / USD has a negative correlation with each other or the opposite direction of the trend. If the trend of EUR / USD rises then the assumption of trend USD / CHF at the same time is down. This can be seen from the chart of EUR / USD and USD / CHF at the same time frame, the general trend of price movement in the opposite direction. Note the third image pair in 2011 in the daily time frame below:
Correlation factor between the pair is very important to note, especially for a novice trader or a 'newbie', because if one understands the correlation in the open position trading will actually increase the risk. For example, open buy the EUR / USD and GBP / USD will increase risk except possibly at certain moments. Similarly, open buy EUR / USD and open sell USD / CHF will also add to the risk, in addition to the correlation of the image above price movements USD / CHF is more 'choppy' than the EUR / USD and GBP / USD are more price action gives a clear signal .
The currency pair EUR / USD is the most heavily traded in the forex market, and most liquid exchange. In terms of volume, EUR / USD is the highest at 27%, followed by USD / JPY 13% and the GBP / USD 12%.
Commodity currency pair (commodity currency pairs)
Commodity currencies is the designation for the currency of a country that is heavily dependent on commodity exports, could be the result of mining or agricultural products. In the world of Forex trading, commodity currency pair is the EUR / USD, USD / CAD and NZD / USD. In addition, Gold (gold) or XAU / USD and XAG silver or / USD is also categorized as commodity currencies because they are actual commodity traded in USD.
All the commodity currencies have positive correlation with commodities it produces. AUD / USD was positively correlated with the XAU / USD and USD / CAD is positively correlated with crude oil prices.
Cross currency pairs (cross currency pairs)
Currency cross pairs are not traded currency in the Euro, for example:
AUD / USD - Australian Dollar vs. the Canadian Dollar
AUD / USD - Australian Dollar vs. The Swiss Franc
AUD / JPY - Australia Dollar vs. the Japanese Yen
AUD / NZD - Australian Dollar vs. the New Zealand Dollar
CAD / JPY - Canadian Dollar vs. the Japanese Yen
CHF / JPY - Swiss Franc vs the Japanese Yen
EUR / USD - Euro vs. the Australian dollar
EUR / USD - Euro vs. the Canadian Dollar
EUR / CHF - Euro vs. The Swiss Franc
EUR / GBP - Euro vs. the British Pound
EUR / JPY - Euro vs. the Japanese Yen
EUR / NZD - Euro vs. the New Zealand Dollar
GBP / USD - British Pound vs the Australian dollar
GBP / USD - British Pound vs The Swiss Franc
GBP / JPY - British Pound vs the Japanese Yen
NZD / JPY - New Zealand vs dollar the Japanese Yen
Among the commonly traded are: EUR / JPY, AUD / JPY, GBP / JPY and NZD / JPY.
Exotic currency pairs (exotics currency pairs)
Is the currency of countries that are developing with a high rate of the economy, which is paired with the Dollar or Euro. Are often traded among other things:
USD / TRY - U.S. Dollar vs. the Turkish Lira
EUR / GBP - Euro vs. the Turkish Lira
USD / ZAR - U.S. Dollar vs. the South African Rand
USD / MXN - U.S. Dollar vs. the Mexican Peso
EUR / USD - U.S. Dollar vs. the Singapore Dollar
Weakness trading exotic currency pairs is higher spreads and lower liquidity.
Create a watch list of currency pairs on Metatrader 4
Trading platform Metatrader 4 is the most widely used by retail traders worldwide. This platform is very flexible with features that are quite abundant, easily understood and applied. To display the watch list or list price traded currency pairs in real-time, on the menu bar Metatrader-4 to the left above, the left bar click 'view' and select the 'Market Watch' (see image below left) that appears watch list on the Metatrader 4 platform (see picture below right).
To display the 'pop-up prices' to facilitate the monitoring of prices when trading currency pairs, right-click on any place on the market watch / watch list, or press the F-10, then there will be a pop-up price as shown below.
Regarding the selection of currency pairs to be displayed depending on your trading plan. Should be displayed as needed, for example if you want to compare how strong the Euro price when you trade currencies EUR / USD and USD / JPY, you might as well show the EUR / JPY.
When is the right time to trade in the forex market, as well as differences in the various sessions of time in the world forex market.
The forex market is the world is open for 24 hours, but that does not mean the market is always active throughout the day where we can trade with the market conditions as per our expectations. We certainly want to trade when market conditions are very volatile, meaning that when the motion changes in market prices are very high and fast, especially if we are trading with the method of price action, price action is dynamic and fast would be very helpful.
Session time forex market trading world
Broadly speaking there are three main sessions within a 24 hour time forex trading:
Note: Time EST (Eastern Standard Time) = GMT - 5 hours = pm - 12 hours (November - March). From March-November using DST (BST 11 hours faster than the New York Times DST), while from November to March using EST (12 pm hour faster than the New York Time EST)
1 session Asian trading hours (including Australia and New Zealand): open 18:00 ET and
closed 4:00 ET
Session 2 London trading hours: open and closed 3:00 ET 12:00 ET
Session 3 New York trading hours: open and closed 8:00 ET 17:00 ET
Of trade over time session, meetings (over-lapping) occurs between the Asian session and London session at 3:00 until 4:00 ET, and between London and New York sessions between 8:00 am to 12:00 ET.
At the time the session is over-lapping price volatility and trading volume typically increased significantly, as well as liquidity. Forex traders always take advantage of the over-lapping session time London and New York markets between 8:00 am to 12:00 ET to conduct trading activities since that time the session time is the meeting of two world forex market.
Session Asian trading hours
- Starting with the opening of the market in New Zealand and Australia at 18:00 ET, an hour later the Tokyo market open (19:00 EST). Tokyo market is quite important because Japan is the third largest foreign exchange market after London and New York, and the currency pair USD / JPY is also the third largest trading volume after the EUR / USD and GBP / USD.
- The points of 'hot spots' of the financial markets of Asia are Tokyo, Hong Kong, Singapore and Sydney.
- In the Asian session liquidity trade is often so low that many traders who opt for entry to the London or New York session. However, if there are factors driving significant market sentiment, price movements and volatility could rise sharply.
- Economic data from Australia, New Zealand, Japan and China released at this session. As is known Chinese economic data are very influential on the world currency pairs within the past given the country trade with major countries of the world increased sharply both volume and value. In this session, the currency movements AUD, NZD and JPY is more volatile than other currencies.
- If the market conditions at this session of consolidation, usually there will be significant movement on the London and New York.
Session time London trade
- London is the world's largest forex market. Nearly 30% of transactions occur in the world of forex trading session this time. London market began when the Asian market is almost closed, and the over-lapping the time of price volatility and trading volume usually increases. Slippage or differences in spreads that often occurs in Asian session due to quiet the market usually does not happen in this session.
- Economic data from European countries released at this session, so that the related currency (EUR, GBP and CHF) is very actively traded with the volume rose sharply.
New York session trading hours
- When the New York market starts at 8:00 EST, London traders was active back from his lunch break. Over-lapping this time (8:00 ET - 12:00 ET) is the most active in trading volume and liquidity is very high.
- Most of the economic data that is important and significant effect on the release of this session, especially the data for the USD, and CAD were also released economic data on the New York session.
- Because nearly 85% of world forex trading involves currency USD, then all currencies with USD yangberpasangan potential to move with high volatility on the session.
- Price movements tend to slow after the London market closed, unless there is significant market sentiment as the release rate USD or speeches of central bankers (the Fed).
- Closing price New York market is important to note because it often for reference traders as the market close that day, including traders who apply the method of price action in the trading.
The conclusion from the above description, among others:
- The best time to trade is on the clock at 8:00 ET to 12:00 ET or 20:00 pm until 00:00 pm (November - March, see note above), and in March - November at 19:00 pm until 23:00 pm, at which hour the markets of London and New York over-lapping.
- If the Asian session there were signs of consolidation with an indication of price action, you should wait for the London session for the entry, the entry is very risky due to the method of price action but with low volatility.