The Authority’ on Price Action Trading. In 2016, Nial won the Million Dollar Trader Competition. You should use this two-part article series as a reference guide to answer any question you may have about which currency pairs to trade and what times to trade them. The following points will explain which currency pair’s fall into these three categories forex slippage explained the advantages or disadvantages of each.
We are also including silver and gold in this list since they are quoted in U. First off, many of the major currency pairs are correlated in their price movement, meaning they move almost identical to one another. GPBUSD is typically a bit more volatile than the EURUSD, but if the EURUSD is in an obvious up or down trend you can safely assume the GBPUSD is in the same trend, thus we say they are positively correlated. The USDCHF is negatively correlated to the EURUSD, so if the EURUSD is moving higher the USDCHF is most likely moving lower. You will find if you take a EURUSD chart and a USDCHF chart of the same time frame and hold one right side up and one upside down, they will look fairly similar, this is because they are negatively correlated.
So what does this correlation business mean to you? It means you need to be careful when making your trading decisions so as to not double up your risk or trade against a position you currently have open. Similarly, if you enter a long position on the EURUSD and a short on the USDCHF, you are essentially doubling your risk. I have found the USDCHF to be very choppy compared to the EURUSD and GBPUSD, and I rarely trade the USDCHF as a result, I aim my focus on the EURUSD and GBPUSD if I want to trade a European currency against the U.
The EURUSD is also the most widely traded pair, and therefore it carries the highest volume of all currency pairs, this also means it is the most liquid, which is another reason I prefer it over its correlated counter-parts. A commodity currency is a name given to currencies of countries which depend heavily on the export of certain raw materials for income. Australian dollar, Canadian dollar, and New Zealand dollar. Now, I am not advising traders trade all of these crosses, there is certainly a short-list of the crosses that I trade and that I recommend all my students trade. These four cross pairs are the most widely followed and make a nice addition to the major pairs mentioned above. The exotic currency pairs are not the best place to start as an aspiring forex trader, I still do not trade them and there are reasons why.