Choices on the Foreign Exchange Market

 Foreign Exchange Market

Choices on the Foreign Exchange Market

When you start looking onto the foreign exchange market you will find that there are a lot of choices available to you.  As the forex market trades all the currencies in the world you have a very large number of currency pairs to choose from.  However, there are a number of factors that you should consider when you look at the pairs you want to trade.  You need to consider your forex broker, your trading skills and the capital amounts you have.

Which Currencies are Best for You?

The first factor you should be looking at is the currency pair that is best for you.  There are certain trading strategies that you can use which should use certain currency pairs.  The reason for this is that certain currency pairs have higher volatility than others.  This means that if you are using a range strategy you should use a currency pair that does not have high volatility.

You also have to consider your skills and experience when you look at the best currency pairs for you.  The commonly traded currency pairs are best for new traders.  This is due to the way they move and the availability of information regarding them.  More exotic currency pairs have harder to determine movements and less information available.  This makes it harder to predict the movements and to make a profit from them.

How Your Foreign Exchange Market Broker Affects this

Many new traders do not consider how their forex broker can affect the pairs they trade on the foreign exchange market.  When you plan how you are going to trade you include the currency pairs in this.  However, the forex broker you use may not offer you all the currency pairs on the market.  Many brokers only offer the most commonly traded pairs.  However, there are some that offer you more exotic pair.  As there is a large amount of currency pairs that can be traded on the foreign exchange market it is very rare to find a forex broker that offers all of them.

Your Capital and the Currency Pairs

The amount of capital you have actually does have an impact on the currency pairs that you trade.  This is something that many new traders do not consider.  The more capital you have the more risks you can take.  With the exotic currency pairs you are talking more risk just by trading them.  This is due to their unpredictable movements.  The movements of these pairs are unpredictable because one large transaction can swing the trend.  The commonly traded pairs require less capital and this is why they are recommended to new traders.  As they move in more predictable ways you can easily make a profit from them if you know what to look for.

You should also consider that you are able to trade with more currency pairs if you have more capital.  Of course, it is not recommended that you trade with too many currency pairs.  This can lead to addition time spent on analysis and missed opportunities on certain currency pairs.  There are many successful traders who make all their money off a single currency pair.

 

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