Which is the safest forex pair to trade?

Many beginners who go into forex trading without sufficient understanding and only based on the desire to get large profits.

As a result, they feel confused when opening a trading platform and see the text lined up and various charts up and down.

Besides, the difficulty in choosing forex pairs for beginners is a problem that often arises. Often, they only open and close positions on various pairs because they think the results will be the same.

In fact, forex trading is an activity that closely related to a currency pair.

Every currency pair provided by a broker on a trading platform has unique characteristics so it is not the same in every currency pair.

Because of that condition, sometimes we as traders will surely raise questions like this:
  • What is the best pair in forex trading?
  • What is the most profitable pair in forex?
  • And also, what is the safest pair in forex?

Well, from these questions. We can summarize it into an answer by considering the characteristics of the currency, for example, its liquidity and volatility. To discuss some of these questions, I will discuss them from the basics first:

Know the forex pairs

By knowing the forex pairs for suitable beginners, set trading strategies will be more directed.

Forex pairs are currency pairs that traded on the foreign exchange market. For example, you see GBP / USD 1.30125 written on the trading platform, which means: to buy 1 Pound, Sterling, you need 1.30125 USD.

To make it easier to understand currency pairs and how to use forex trading, we just memorize the key that Base Currency is the basis for your orders. So if a trader says that he bought GBP / USD, it means he is buying Pound Sterling and selling US Dollars; and if Sell GBP / USD means selling Pound Sterling and buying US Dollars.

By understanding the pair we can do trading. But that is not enough, because we also have to know about the pair, whether included in the Major Cross and exotic pairs. Because according to some experienced traders, the forex pair has different characteristics.

What are the characteristics of each currency pair in the forex? 

Forex pairs are divided into 3, namely major, cross and exotic pairs. It bases the division of this pair on liquidity and volatility in the market.

Market participants will gather in currency pairs that easily traded (high liquidity) so that transactions can continue to run and not experience bottlenecks. The following are the characteristics of each forex pair:

Characteristics of Major pairs

Major pairs are currency pairs comprising USD and other major currencies. Not only currency pairs, but commodities traded with Greenback also included in major pairs. Major pairs commonly available at forex brokers include:
  • EUR / USD
  • NZD / USD
  • USD / JPY
  • GBP / USD
  • AUD / USD
  • USD / CHF
  • USD / CAD

The most liquid and the most traded pair in the forex market is the major pair of EUR / USD. These two currencies that many people are looking for very influenced by the conditions of their respective countries.

If the United States economy is strong, the USD will strengthen against the Euro, and vice versa. To trade volume, EUR / USD ranks highest with over 20%.

Cross Pair Characteristics

Currency pairs that do not involve the USD, but still have high liquidity and widely used in the forex market classified as Cross Pair. Some Cross Pairs that often traded include:
  • EUR / JPY
  • AUD / JPY
  • GBP / JPY
  • NZD / JPY
In terms of liquidity, Cross Pair has characteristics that are not as strong as major pairs, but traders must have more ability to predict volatility.

The technique traders often use that to get profit opportunities on Cross Pair is to trade on the weakest versus the strongest currency pair, which is usually the benchmark is the US Dollar Index (DXY). For pairs that belong to this group will be more difficult for beginners.

Exotic Pair Characteristics

It embeds the term Exotic Pair in the currencies of developing countries paired with USD or Euros. For example:
  • USD / TRY
  • USD / ZAR
  • USD / MXN
  • USD / SGD
  • USD / INR
  • USD / IDR
  • USD / PHP
Exotic Pair trading often tried by traders who like challenges and have extra capital because the spreads are very high and the level of liquidity is low.

Although the risk is greater than the major pair and Cross, the profit that can earn is also more promising, because of its great volatility. This is following the principle of High-Risk High Return.

This pair is also less recommended for beginners because, besides its volatility and liquidity, the spread in this pair is also very thick

Which is the best and safest Forex Pair?

Actually, there are no standard rules regarding safe and best forex pairs. The choice of this pair depends on the strategy and characteristics of each trader itself.

Therefore, choosing a suitable forex pair for beginners must be based on personal observation. Forex pair recommendations for beginners are:
  • EUR / USD and USD / JPY for major pairs
  • EUR / GBP for cross pairs.
Beginners can also use other types of major pairs such as USD / CAD, AUD / USD, NZD / USD, and USD / CHF. The pairs are easier to analyze, because they can show a more predictable trend, and the characteristics don't store too many surprises.

Conversely, there are pairs that not recommended for beginners, namely:   EUR / AUD, GBP / AUD, GBP / NZD, GBP / CHF, EUR / JPY, GBP / JPY, and USD / RUB. That pair have wide spreads with high volatility and low liquidity.

Movement on EUR / AUD, for example, can reach 200-400 points and the price can fluctuate significantly and also the trend that occurs can last long enough, even though the spread is bigger. Beginners who do not really understand money management can quickly fall into Stop Loss.

Conclusion:

There are no safe pairs in forex and also there is no best pair. Basically, all pairs are profitable if we can guess market movements and we can enjoy it.

But as a reference in choosing the pair we are trading, we must understand the characteristics of the pair type, its volatility, and also its liquidity.

For volatility, you can see in the table the volatility values of various currency pairs below:
Forex volatility table per pair
Forex volatility table
Looking at the volatility table above, you can see your opportunities in trading.

If you choose a pair that has low volatility then the profit generated is usually low and also the risk is low, whereas if you choose the high volatility the profit will also be high but the risk is also high. The table cannot be a benchmark forever because the certainty of currency movements is always changing, who knows ...


Next, we recognize currency liquidity. In the Forex market, liquidity is related to the ability of currency pairs to bought and sold without causing significant changes in the exchange rate.

We can say that currency pairs to have a high level of liquidity when easily bought or sold, and there is a large amount of trading activity for the pair. For more details, see the image below:
Liquidity index forex pair
Liquidity index forex pair
From the picture above we can see it, the greater the percentage of total volume, it means that the liquidity is high, which means the more easily bought or sold. Well, if you want to feel safe in trading, then you can choose pairs with high liquidity, for example, EU and UJ pair.

Of course, the above table cannot be a benchmark forever because currency liquidity must change so if you want to find out more you have to see it live. Maybe until here my post this time. If there is a mistake, I'm sorry. I'm just a beginner trader and need to learn more. Thank you.


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