Popular Traded Pairs
Now that we’ve covered a portion of what to look for when choosing your broker, now let’s take a look at some of the most popular forex trading pairs.
First we need to know what currency pairs are, which are national currencies from two countries that are linked together for trading on the forex market. Both currencies will have exchange rates on which the trade will have its position basis. All trading will actually take place through currency pairs.
Typically, the most popular traded currencies are the U.S. dollar, the Canadian dollar, the Euro, the British pound, the Swiss franc, the New Zealand dollar, the Australian dollar and the Japanese yen. The EUR/USD is the most traded currency pair in the world, with transactions making up around 24$ of daily forex trades last year. The reason why it is considered to be the most popular is because it represents two of the world’s biggest economies. The European and U.S. markets. The high daily volume of this currency pair ensures that the pair has a lot of liquidity which generally means it has very tight spreads. This can be very enticing for traders because it means that large trades can be made with little impact on the market.
This currency pair, also known as ‘the gopher’ is made of the U.S dollar and the Japanese yen. It is the second most traded currency pair on the market, which represents approximately 13.2% of all daily transactions last year. Much like the EUR/USD, it is known for its high liquidity, a feature it gets from the fact that the yen is the most heavily traded currency in Asia, and the dollar is the most trade currency in the world.
Commonly known as ‘cable’ due to the long deep-sea cables that used to deliver the bid and ask quotes between London and New York. Last year this pair made up 9.6% of all daily forex transactions. The strength of this pair comes from the fact both currencies are represented by strong economies. If the British economy grows at a faster rate than the American economy, then it is common for the pound to become stronger and the dollar to become weaker.