How to determine which pairs to trade?

Hi everyone, I’m a new trader I would really like to know how do you choose or select the pairs to keep your eyes on ? I understand that over the weekend you should analyse all the pairs preparing for the week. I just need to know exactly how do you select the pairs? I have been trying to use Economic calendar but I get confused for example when I see Aud news with a sign that the volatility will be high…does this mean all the pairs with Aud will be active? thanks.

Its always hard to judge price direction following a news event, like say a scheduled speech by a central bank governor or board member. Nobody knows for sure what they will say and it might not cause any price movement anyway. But if the news is bullish for the currency, potentially all pairs based on that currency will react bullishly. Its just that you can’t know in advance which will react most and least.

Correlation of currencies and particular pairs is a field worth getting to understand though. e.g. CAD correlates well with Oil, AUD and CAD often move together, AUD tracks commodities especially metals, each currency tends to have a negative correlation with its home stock market index etc. etc.

Worth looking at other pairs based on a given currency before you consider a long-term trade. So it would be an odd decision to go long on an AUD-based pair when the other 6 major AUD-based pairs are bearish. For intra-day trades, not so crucial.

There are two main ways you can do it -

  1. Become a specialist in one pair/currency (maybe in two) and follow its economic news and get used to dealing with it and rely on having better knowledge and understanding than most traders (this is difficult - your opponents are financial institutions with research departments)

  2. Become a specialist in trading specific set-ups from charts, and then trade whichever pairs happen to be showing the types of set-ups you’re looking for, at the time (easier).

It’s also worth noting the dealing costs, which vary dramatically between different pairs. Your dealing costs if you trade something like GBP/NZD can easily be ten times higher than those of someone trading EUR/USD.

Yes, it means there’s a higher chance of that, across all AUD pairs, if the information’s correct (it isn’t, always).

Then you have to decide whether relatively high volatility is good or bad for you: traders are divided nearly 50/50 on that question, according to the type of trading they want to do.

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I agree with your No.2 Lukas. So much so that I don’t even see No.1 as a viable option for private retail traders.

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there is many ways for determine things , but really all you need for now is sma its tell the trending pairs
most of pairs are not what you want anyway you take the best one

[quote=“LukasVisser, post:3, topic:118433”]
Become a specialist …and rely on having better knowledge and understanding than most traders (this is difficult - your opponents are financial institutions with research departments) [/quote]

This is not really the case. When you open a position your counterparty is a market-maker, either your own broker or via your broker - not directly with a financial institution that is specifically and personally challenging you. The market-maker does not care whether you hit their bid or their offer side - that is the nature of their business. Much of the time the market-maker is being hit on both sides simultaneously and is benefitting from the spread profit. - they cannot be “opponents” to both sides at once!

The market-maker is only interested in its overall exposure at any one time and adjusts the bid/offer accordingly. They are not carrying the other side of your position all the time whilst it is open! If their directional exposure is too great in any one direction then they will themselves lay off their risk in the institutional markets such as interbank.

In addition, the trades by financial institutions are world’s away from the typical size of a retail trader’s positions and, again, they are only interested in their overall exposure according to their own analysis and objectives.

The only “opponent” to any trader, retail or institutional, is price itself. And price moves according to the overall net changes in buying and selling pressures. There is no individual adversary holding the opposite side of one’s position and competing with you as to who is the “best”.


Sure. Thanks Simon. Sorry, I didn’t mean “opponent” to be “person holding the other side of your trade”, I meant more generally, “other people trying to take money from the markets at the same time that you are”.

This makes a lot of assumptions, doesn’t apply to everyone, and is arguable in principle anyway. I disagree with it completely, myself.


[quote=“LukasVisser, post:7, topic:118433”]
I meant more generally, “other people trying to take money from the markets at the same time that you are”.[/quote]

Well yes, I think one can certainly look at it that way, But the raw truth of it is that we, and we alone, are responsible for whether we get it right or wrong. We have a perfectly free choice whether and when to buy or sell and the market is going to do whatever it is going to do whether we are in there or not.

I know what you mean, and, certainly, institutions have an edge over us both in terms of information and tolerance. But some of us will be in the same direction as they are whilst others are in the opposite direction. Which way we choose to face is 100% independent from everyone else.

But that, to me, is the beauty of retail forex - that we are all sailing the same seas with the same destination, but in different boats - we just disagree which way the wind might be blowing! :smiley: :smiley:

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I know a lot of PA traders do include an MA (sometimes EMA sometimes SMA) to help determine whether there is a current trend or not. But, as always, an MA is behind the present and it tends to only confirm a current trend in progress and is only really relevant where there is a prolonged trend.

An MA is not good at identifying, by itself, the start of a trend - or its end come to that! - and can be even more trouble during a period of prolonged consolidation. But, like all things in TA, use it if it helps, dump it if it doesn’t! :smiley:

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nothing applies everyone needs 100% all the time ,we can sit and talk about trends and arguing market conditions for ten pages what you get out of it ,we need start foundation from somewhere and the sma is a easy way out there from what we have, this was a proof way to determining a trending pairs
, it can be different for ranging pair but then you looking at trends again to bring up the odds , not many people decide to go without looking the other one these two always come together trending and ranges
, you disagreeing not me but what most of the chart tools and financial markets is came with
just because is basic not mean is a junk , if we not take some conclusion and trading help from discussion this mean we talking non sense

Good post…

I always look at currency pair volatility and how stable the trend is.