If you’re not sure how the Forex currency market works and you don’t know all the little details that can make or break you, then it’s best that you start out by choosing just one currency rather than two or three.
One currency refers to currency pairs such as the United States Dollar and the Euro (USD/EUR). By the way, the USD is still the most widely traded currency. So how do you know which currency pair is the best one for you to pick?
You would look for the currency pair with the smallest spread. A spread means it’s the difference in what you pay to buy the currency (or the ask price) versus what you’ll sell it at (the bid price).
For example, let’s say you see a quote for a currency pair of 1.3121/1.3119 – the spread here equals two pips. A pip stands for percentage in points. Now say you see a quote for a currency pair that’s 1.3140/1.3170 – then the pip is thirty points.
To put it in everyday language, think of the spread like a simple math problem. When you look at the major currencies, look for the pairs with the smallest number to subtract. A broker makes his or her money by spreads.
The larger the spread, the more you pay and the less you see back in your pocket. If you use a broker, don’t choose one who offers a wide spread. The smaller amount of pips, the more money you stand to make.
When you’re involved with Forex trading, just like in any other business, you want to sell for more than what you paid. If you don’t watch the pips, you’ll end up with less profit, or worse, none at all.
Where can you get the information on the currency pairs in order to choose the best Forex currency market? You go back to the beginning. You get the information you need by using technical analysis that will allow you to see and follow currency movements. The charts are a part of technical analysis and the Candlestick charts are generally the best ones to use.
By using a mixture of technical analysis and fundamental analysis, such as charting, moving averages etc. and paying attention to which country’s economy is doing what, this will help you choose the best Forex currency market for you.