The forex market revolves around different currencies with each currency forming a pair with the other one. It will be a total in excess of two hundred pairs on your trading platform and if you were to analyze each one of them on your trading system every one hour, you will soon lose your interest in life.
Thus, it becomes important to design your trading portfolio with only a few selected pairs and focus only on them. You might feel tempted to look into others as well but remember that this selection only will make the core foundation of your trading. This is what all successful traders do when they confine their trading to their selected pairs and same is expected of you… Humanly, you will find even the selected ones very hard to keep up with, leave aside doing all.
So which ones are the most used pairs for analysis and trading and why?
You will be surprised to know that 95% of the worldwide trading activities revolve around only the five Major currencies i.e. GBP, EUR, USD, CHF and JPY. These currencies make a total of ten pairs within themselves and let these ten only make your portfolio. There is a reason why most of the trading happens around only these and the reason is that its only in these particular pairs that you find most of the fluctuations, thus more of the trading opportunities. You also have CAD, AUD and NZD among the other currencies popular with traders but then, that is it. Rest of the currencies is rather quiet in nature and what good is the currency if it just doesn’t move?
However, there is another reason for these currencies to be the trader’s choice and that is that all these currencies mostly trade only in their predefined ranges. That makes these pair’s movements easily predictable under normal market conditions and can be used for all kinds of trading styles, be it swing or the day trading or even scalping. Range traders can easily take their positions near to either of the ranges on any of the pairs. Scalpers trade within the range and switch over to the second pair as soon as the first pair goes out of its daily range. Day traders trade Pivots within the range.
Of course, there are times when the pairs also go out of range but that is only once a while. You have the facility to set your Stop-loss there, just in case.
Now the most important reason for the popularity of these pairs is their tight spread unlike the spread on the non-traded or less-traded pairs, which at times can be as large as the entire trading range. Since the major pairs are always in demand and always in good circulation, they come to you at very reasonable charges. While the most popular EURUSD can be traded for as small as two pip spread, even the most expensive of these i.e. GBPCHF comes to you only at five pips.
I suggest that you also should set up your portfolio only around these popular pairs as it’s only a matter of time before you learn their movements and find you ease trading in forex markets. Handling more currency pairs will not only disturb your focus but also consume a lot of your time. Its not having the maximum pairs, its having selected pairs and the mastery over them that will make you successful and your forex trading profitable.