Currency Pairs

Hey guys, new to forex, still doing a demo account and making my way through babypips school. Question: are some currency pairs riskier to trade than others? or are some pairs less volatile and less likely to have downward spirals than others? Thanks.

Gordon Gekko

You, the trader, define your risk, so in that manner there is no pair that is “riskier” than another. Some pairs do move more than others, if that’s what you mean. For example, the GBP pairs are among the fastest movers, but you also have to keep in mind that they are also among the higher priced, so given equal % moves, they will experience larger pip moves. If you are looking for pairs that move the least, look at EUR/GBP and EUR/CHF as generally the ones with the tighest ranges among the major group.

As to the downward spiral question, remember that trading currencies is not like trading any other market. A stock or gold or oil is a one-sided value play. By that I mean if a stock goes up, it’s value is going up. If it’s price goes down, it’s value falls. In currencies, you are trading relative values. USD/JPY represents the value of the USD relative to the JPY. If that rate is rising it could either be due to USD strength or JPY weakness (or a combination).

Is it possible to see strong one-sided action. Of course, but these sorts of moves don’t tend to act like the ones you see in other markets where panic selling happens. In the currency market, panic selling of one currency would imply panic buying of another. How often do you ever hear of panic buying in any market. Not often. That, and the massive size of it, is why the forex market tends to be the least impacted by data releases and what not. Watch the insanity of Bond traders sometime when the Payrolls figures come out. The forex traders have nothing on that!