The foreign exchange market is the largest market in the world with trillions of dollars traded every day. It’s also called Forex, which comes from the term “foreign exchange,” and it’s different from other markets where you trade a specific asset, like a stock, and the vertical axis represents its price in the currency of the country where you reside.
Here in Forex, it’s always one currency against another, so your profit will come from the relative value between two currencies: how much one currency is strong against another. In this article, I’ll show you the major currency pairs to trade in Day Trading, swing trading, position trading, but first, let’s talk more about this market in a general way.
Forex Follows Trading Rules
The Forex market is a true 24-hour market, except for weekends. It’s insane to want to trade over the weekend {meme slap}. When it’s Sunday night in the West, Asian markets are already opening on Monday morning, and when the markets here close on Friday night, it’s already Saturday in Asia.
But you don’t need to worry about following the market all the time because you have tools like take-profit and stop-order, to pre-program at what price level you want to exit the trade, so you can go to sleep knowing that your order will be executed.
By the way, if a trader could only have one rule, it would always be to use the stop, so don’t forget to limit your risk and your losses. If you still have doubts about technical stop placement, I have a video on the channel.
This is a market where you trade with leverage, meaning you only need 1% of the value you’re trading in your account. I’ll show you practically, but of course, you need to understand the risks of large financial losses when using leverage, which can even exceed the amount you deposited. So I’ll explain how the leverage works, but I’m not recommending it, it depends on your risk profile that only you know.
And what impacts the price of a country’s currency?
Dude, if tomorrow a bunch of Brazilians start buying dollars like crazy, I don’t know, news came out saying socialism is coming and food will run out in the country, everyone starts buying dollars, it’s clear that the Real will fall. Because you take the Reais you have in your account and use those Reais to buy dollars, in other words, you’re selling Real, selling pressure on the Real, our currency will devalue.
When a currency appreciates, it means more capital is flowing into that country, and if it depreciates, it means more capital is leaving that country, more people are getting rid of that currency. Of course, there are other macroeconomic dynamics, but that’s a topic for another video.
In my case, I use Price Action with Volume and Fibonacci, which can be used on any time frame and asset, including in Forex. I teach this method in the Trader Training, my day trading course from scratch with personalized support and lifelong access.
Forex Pairs
The currency pairs that are most used in trading are:
– Euro/dollar (EUR/USD)
– Pound/dollar (GBP/USD)
– Dollar/yen (USD/JPY)
– Dollar/Swiss franc (USD/CHF)
– US dollar/Canadian dollar (USD/CAD)
– Australian dollar/US dollar (AUD/USD)
In the beginning, it’s recommended to trade the pairs with the highest liquidity, like the euro-dollar (EUR/USD), the largest of all, but you can trade any currency pair in the world, from Polish zloty to Mexican peso (PLN/MXN).
You’re betting that the currency that comes first in the pair will rise against the one that comes after: GBP/USD, that the currency of Great Britain will appreciate against the US dollar.
Watching the Active Session
It’s recommended that you start trading these pairs that I showed, which have more liquidity and lower spreads. But according to the market’s hours, you’ll have currencies being traded more actively. There are 3 main sessions in this market, throughout the day: Asian, European, and American.
So if you’re going to trade on Sunday night, the Asian markets will be open, so the Japanese yen and the Australian dollar will be more actively traded. If you want to trade GBP/USD, it won’t be at this time. Choose a currency pair where only one of the currencies is active in that session.
For example: if at the moment only the Asian markets are open, it’s preferable to trade dollar-yen or euro-yen, instead of Australian dollar-yen, since in the former case only the yen is active in the session, and it will diverge more in relation to the dollar and euro than to the Australian dollar, which will also be active.
London and New York Sessions
In the London session, European currencies are active: euro, pound, and Swiss franc (CHF). The 3rd session is the New York one, when the Asian market is closing, the most active currencies will be the Canadian dollar (CAD) and the American dollar (USD), in addition to gold.
Gold is traded in all sessions because despite not being the currency of a country, it’s a widely traded investment in relation to fiat currencies, under the ticker XAU, so you can speculate on the price of gold against the dollar with XAU/USD, or against the euro XAU/EUR, but it’s better in dollar parity, stop trying to invent fashion {meme slap}
What you want is for one currency to be strong and the other weak, with a clear trend, otherwise, the chart will be consolidated, and you won’t have good volatility, see my trend trading videos later, and you won’t want to know anything else.
So let’s see here on the chart, and this isn’t a recommendation to trade Forex, it’s not a recommendation for this specific platform, I’m just used to it, but you decide which platform is most suitable for your needs. The purpose here is to inform you about the most important points for those who trade in this currency market.
Check out my video teaching this directly on the platform:
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