Analysts regularly search for the most traded forex pairs so as to plan their strategies and improve their trading. But which are the most traded forex pairs in the market? In this guide, we will share with you all the information about the most traded forex pairs.
You should also know that not all trading pairs have the same trading volume and liquidity. However, considering that the forex market is an international financial market, you would be able to get the necessary liquidity to trade. Nonetheless, you should mostly focus on the largest currencies as some smaller countries might have non-functional currencies.
Disclaimer: the information shared by MavenGrowth and its writers should not be considered financial advice. This is for educational purposes only. We are not responsible for any investment decision you make after reading this post. Never invest more than what you are able to lose. Always contact your professional financial advisor.
Understanding the Forex Market
Let’s not focus on the most traded forex pairs. No matter where you are, you would be able to get access to the most traded forex pairs in the market. We should also know that the most-traded forex pairs are those that have lots of things in common.
When we talk about forex pairs, we usually talk about the relationship between two different economies. In some cases, these currencies could work as proxies of the health of the general economy of the country and also the trading relationship between them.
The forex market and the relationship between currencies is a great way to understand the commercial ties there are between two countries and also the monetary policies implemented by each of them.
The forex pairs that you choose to trade will make a difference on your portfolio. You should clearly understand which are the aspects that could affect your trading and also the things that could change the course of the currencies you trade.
Which are the Most Traded Forex Pairs?
The most-traded forex pair are the following:
- EUR/USD
- USD/JPY
- GBP/USD
These three trading pairs represent most of the volume of the entire market. Why? Because there are large ties between the European market and the U.S. economy. But there are also large commercial ties between the United States and Japan and the United Kingdom and the United States.
We can also see that the U.S. dollar is the most traded currency as the top three pairs include the USD. This shows the strength and power of the US economy and currency. The U.S. dollar is used for international commerce, contracts and commercial relationships rather than local currencies.
The U.S. dollar is also the most liquid pair in the market. Thus, forex traders should definitely focus on the U.S. economy and understand how the market behaves. Furthermore, we should also know that monetary policy in the United States (conducted by the FED) has a global impact in the forex market.
If you want to trade these pairs, you should closely follow economic decisions in the U.S. and also in the countries and regions that you would trade with. In the case of the most-traded forex pairs, we should focus on the United States, Japan, the European Union (Eurozone) and the United Kingdom.
These are among the largest economies in the world and would definitely have an impact on the general forex market and in the trades that you would conduct. Remember that this monetary policy and commercial decisions would have an impact on your trading strategies.
Other Forex Trading pairs
The forex market has dozens of trading pairs that can be used to trade and create new strategies. The goal is to find a clear and unique trading strategy that would let you reduce your risk and increase your profits. When analysing the forex market, you should try finding different trading pairs, something that lets you diversify your portfolio and reduce your risk.
You should also pay close attention to non-traditional trading pairs linked to developing economies. These currencies are usually smaller and would make trading more difficult as there could be more volatility and inefficiencies in the market. Monetary policies of some economies are sometimes more inconsistent compared to developed economies, this is why you should pay attention to the way in which it works. This is why you could focus on the trading pairs of larger economies and that follow more stable policies.