Forex trading has grown exponentially in the past decade or two. The internet and technological advancements have opened up forex trading access for non-institutional traders. As a result, a new wave of forex traders has emerged.
People have been heavily investing in forex, and for a good reason. Research shows the foreign exchange marketplace is the world’s most valuable and liquid market. According to statistics, forex markets had a daily turnover of over $6.6 trillion in 2019. In addition, the forex market has over 170 different currencies that traders exchange round the clock.
Considering over 170 different currencies exist on the market, you’ll be surprised to learn that seven currency pairs account for approximately 68 percent of forex trading volume. These currencies are the most popular, and traders clamor to add them to their portfolios.
What Are Currency Pairs?
Currency pairs refer to two separate national currencies that traders pair for trading on the foreign exchange market. Both paired currencies will have exchange rates that determine the trading position. Typically, currency pairs measure the value of one currency against another. As a result, you’ll find every currency pair has a bid and ask price. The bid price refers to the maximum price a buyer will pay for a currency, while the asking price is the minimum price a seller would accept.
Forex trading in the marketplace takes place through currency pairs. Hence, they’re extremely crucial. You’ll find that the most common currency pairings often include the Euro or US Dollar. The Euro is particularly popular because it’s a shared currency for the European Union. Meanwhile, the US Dollar reigns supreme because of its global acceptance. Many countries will often use the dollar instead of an official currency because it’s stable.
The Most Popular Foreign Currency Pairs
Here are the most popular foreign currency pairs. They include:
The US Dollar and Japanese Yen currency pairing are particularly popular. Many traders often refer to it as “The Gopher.” The Gopher currency pairing boasts high liquidity, meaning traders can trade the currency pairing in large quantities without worrying about price fluctuations. In addition, this currency pairing also has one of the tightest spreads in the forex market. As a result, the trading cost for this currency pairing is low.
The Euro and US Dollar is also popular currency pairing. It’s also referred to as “The Fiber.” Fiber is the world’s most commonly traded currency pairing because of the strength of both individual currencies. In addition, traders prefer Fiber because it has very low spreads and boasts high liquidity. These factors also make it excellent for scalping.
The British Pound and US Dollar currency pairing are also known as “The Cable.” Most traders view Cable as a volatile currency pairing because of price fluctuations and exchange rate movements. The British Pound has been particularly volatile in recent years, especially since Brexit. However, many day traders hold onto Cable because they can profit from the price fluctuations. Likewise, swing traders also favor Cable for this reason. Most experts recommend technically analyzing the market carefully if you’re trading Cable.
Another popular currency pairing is the Euro and the British Pound. This currency pairing is commonly referred to as “The Chunnel.” Most experts consider Chunnel one of the strongest currency pairings because of the solid trade history between the UK and the rest of Europe. However, recent events like Brexit have made Chunnel more volatile, appealing to experienced traders.
The combination of the US Dollar and the Swiss Franc is another popular currency pairing known as “The Swissie.” The Swiss Franc has always been popular because many investors consider Switzerland a safe haven, contributing to its financial stability. Generally, the Swiss Franc remains stable during periods of high market volatility, making it an excellent investment.
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