Factors to consider

When picking pairs to trade there are a few factors you need to consider. These are the sorts of steps we generally take each morning when getting ready to start watching and waiting for trades. This is how I choose which forex pairs to trade.

• Cost of the trades – This is less important for longer-term strategies that target bigger trades. For example, if you’re going for 100+ pip trades, then a spread of 2 or 5 will make little difference. But scalping where you’re targeting 5 to 10 pips it’s far more important.

• Liquidity – Again, this is more important for scalpers but should be considered for long term traders as well.

• Your trading times – If you are a late-night person, you might have more luck looking at markets outside of your usual times. So if you’re away during Australia’s session then you may want to consider the AUD. Typically the EUR/USD is almost always good. But check the session times and when you’ll be able to monitor trades and consider pairs in those timezones.

Is there movement in the pairs you’re looking at, see below

Don’t worry about zooming in on this picture of the forex chart, it’s just for illustration purposes!

Choosing forex pairs to look at

So what we often do is load up all of the majors and a few other of the more traded pairs. This allows us to make sure we’ll have good pricing and a good chance at high liquidity. Then we look at each forex pair and make sure that there is some kind of direction or trend.

We won’t leave them as squashed, we’ll set them to full screen and usually the 4-hour or 1-hour chart and see if there is a clear trend. If we cannot find a clear trend, then we close that pair for the day. Then we move on to the next and eliminate the ones where I don’t see a clear trend.

Sometimes you’ll end up with 3 or 4, and that is good. If you find you only have 1 or 2, then start looking at the more exotic pairs. Stick with larger currencies where possible, and if there is no clear trend then drop them for the day. Try to get at least 3 pairs where there is a clear trend.

Choosing the right forex pairs helps increase your chance of success There are no guarantees in forex, so you need to do everything you can to start stacking the odds in your favour. By eliminating quiet markets and focusing on markets with a good trend that is less expensive to trade you are increasing the chance of success. So when you choose which forex pairs to trade, just keep these simple things in mind. After a while, it will become second nature!

As an example, here is the EUR USD Forex Pair on a 4-hour chart. We saw that there is a bearish trend so we will keep that one open looking for bearish entries. If the chart was not showing any clear movement we simply close it and try again tomorrow.