I’ve seen many people say that they focus on specific currency pairs, or that certain systems are most effective when used with particular pairs. I’ve been learning for a few months now and I’m coming close to finishing the Babypips school. However, when I’m looking at charts I often don’t even know which currencies I’m looking at. I simply search for the certain signals that I’ve been taught to look out for. I mean, technical analysis does not require you to know what pairs you’re trading, so why focus on a select few? Do some pairs give more reliable signals, or something like that?
The spread can be too much in some currency pairs and also some pairs are just too erratic so managing your open positions on these pairs can be problematic.
Like so many things in forex, there is no yes you should always, or no you should never. The right answer to a lot of questions is like yours; It depends. . .
For some people it’s easier when they first start to deal with just one pair. As well certain currency pairs depending on your trading method are better to trade than others. Certain currency pairs are more volatile than others. If you break your trades down into trend, momentum, cycle and you were trading short term, momentum would generally be more important than if you were planning to stay in the trade for a while.
Don’t worry so much about not understanding charts with a couple of months under your belt. If you stick with it and allow yourself to learn, one day (and that day is different for everyone) you will get an “A-Ha moment where it will make sense. (that’s when the real danger starts; when you get a little bit of knowledge) You’re right about tech analysis does not require you to know what pair you’re trading, but it does require you completely understand the tools you’re using to get those signals, have a set of trading rules in place and following them constantly with patience. I found the shorter time you trade, the better you have to be at spotting signals.
So the nature of different currency pairs does vary? That would certainly explain why you may focus on certain pairs! Can you recommend resource that will explain how they vary in more depth? Thanks
I think the most common reasons are
1 - Spread is tighter (typically EURUSD and USDJPY)
2 - The ADR / recent volatility is alluring (like GBPNZD recently has been popular because it has a pretty big Average Daily Range).
3 - It’s just simpler and easier.
That being said, forex is unfortunately very interconnected (both directly through price mechanics and indirectly through people doing arbitrage) and as such it can be limiting to only see one or two pairs. If you’re watching EURUSD, expecting it to fall, but all of today’s focus and activity is in USDCAD which was being sold off (weakening the USD side, making EURUSD rise), it could throw off your perspective.
Here’s an illustration how price moves from demand to supply and vice versa
Open up your trading platform and look at a plain candle chart. You can see the supply and demand areas. There are also indicators that will point them out for you. But if you do a little reading and compare your charts to the above, you shouldn’t have any problems. Just remember Resistance = Supply, Support = Demand.
If you want to see a volitle currency pair, open your platform go to the daily time frame and look at nzdusd pair, then go to
the audusd pair and see the difference
That is a personal choice and there is no right or wrong approach. Forex is a very dynamic market and as with all other assets there are so many right strategies out there, you need to find the one which works for you and not what works for others.
It’s up to the individual how many pairs they want to trade. Some pairs exhibit unique behaviour, like the EURGBP which tends to range (due to correlation b/w European and British economies), or carry trade pairs like the AUDJPY and NZDJPY, which tend to be more “emotional” and reflect greed or fear. I’m mainly a mechanical trader and trade most majors and crosses after strenuous backtesting.
The major pairs are more liquid, so they are more stable and less likely to whipsaw as much. The spreads are less as well. Although, if you swing trade as I do, spread costs aren’t much of an issue. And if you use proper risk management you can have your stop loss be far enough away that you can handle whipsaws without getting stopped out.
I would focus on a particular currency pair because I mostly d trading on it I can easily find its analysis and suitable time for trade according to my trading style. My main focus is on major currency pairs they are having low spread and good market movement.
Trading currency pairs mainly depends on the trader’s personality and trading style.
I personally trade the majors (EUR/USD, GBP/USD, USD/JPY, USD/CHF) because of their tight spreads, liquidity, and the increased tendency of common indicators to hold (because so many are watching them). Happy Pip likes her AUD/USD, USD/CAD, and NZD/USD because they usually move in the same direction vs. USD. Cyclopip likes his crosses (EUR/GBP, EUR/JPY, GBP/JPY) because they usually have longer trends and higher volatility.
I hope you also get to experiment and find out for yourself which currency pairs suit you. Good luck!
i’m a newbie and i feel it helps me to keep it simple, i focus on the eurusd and usdjpy exclusively
i’d rather master one thing than diffuse my energies over many things and never reach success in any,
focusing on one pair allows you to really get a feel for the market and your brain begins to form a long-term visualization of the ebbs and flows of the particular pair
First, you just can’t keep up with every pair out there.
Secondly, different pairs have their own particular characteristics, ways of moving, etc. - and therefore I think one does better to be intimately familiar with 2 or 3 pairs, or even just one, rather than being all over the board in one’s trading.
