You will read a lot of info on the best currencies to trade and in this article, we will show you the best currency pairs to trade and some we will look at, offer fantastic profit potential yet, they are ignored by most traders.
Most people who write about the best currencies to trade focus on the majors of - Dollar v the Euro, Yen, Swiss Franc, British Pound, because they all offer good liquidity and the tightest spreads with the Euro and Yen are the most liquid currencies against the Dollar and with the tightest spreads - they must be the best to trade? This is not quite correct.
They offer excellent long term trends but the disadvantage of trading these currencies is the speculative interest is so high and this means volatility can also be high, trading conditions can be choppy seeing many trades hit on stop, as the markets spike either up or down, so they can be great to trade but you should not just focus on these majors, as other currency pairs also offer excellent profit potential.
The Australian Dollar and Canadian Dollar are another two good majors to trade and while spreads may be wider than the above currencies, these currencies offer excellent long term trends and offer position traders some great opportunities.
Trading Cross Rates for Bigger Profits
Rather than just focusing on trading pairs which are against the Dollar, you should look for opportunities in the cross rates. Cross rates have higher spreads than the majors but can very often provide the best opportunities if all and the reason for this is there is simply there are less speculators trading them
A common rule in any investment not just currencies is:
"The Less Observed, the better the trade is likely to be. For example, if most traders see a trend coming and its expected by them and the news wires, it's less likely the trade will go as the majority expect. To explain this Bruce Kovner one of the true Forex trading uses the Heisenberg principle in physics to show you why the cross rates can offer some great opportunities.
"If something is closely observed, the odds are it is going to be altered in the process" If a market breaks when know one expects it the odds are therefore far higher than when they do.
If you think about this, it's logical and true - the bulk of traders don't observe the cross rates and they can often offer some stunning long term trends, you can trade without the whipshaw action of the majors.
How to Find the Best Profit Potential and the Best Currencies to Trade
In terms of trading currency pairs to trade simply use the following checklist:
Look at all pairs for opportunities, don't restrict yourself yo just one favourite pair, market conditions change all the time and so does the best currency pair to trade. Furthermore, Only trade currencies which are moving or trending, otherwise you will tying up your capital for long periods of time, wait for signs that the market is starting to trend. If you get in to early, you might have to wait a long time to see any profit from the trade.
So what are the best currencies to trade? This changes all the time and different pairs will be the best at any particular moment in time. If you have understood this article, you will be able to spot the best opportunities as they arise and make some great FX profits.
By Kelly Price
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