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Best Currencies to Trade
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Best Currencies to Trade
Perhaps the most important consideration is the volume and
liquidity of the currency traded.
The reason this is so important is so that you will be able
to exit positions quickly to lock in profits and just as importantly,
cut losing trades quickly and keep losses to a minimum.
The most actively traded currencies against the dollar are:
. The Euro
· British Pound
· Swiss Franc
· Japanese Yen
All traders should consider these four currencies.
The Australian and Canadian Dollar
Short term or day traders should not consider these currencies,
as they are not as liquid as the big three, but they to offer
profits that traders can lock into, from some great long-term
trends.
Personality Traits
While anything can happen in the future, we have tried to
give a brief personality of each currency and the advantages
of trading it, based upon past performance:
British Pound
Thinner volume than the Euro or Japanese yen, means that
short term trading should be done selectively, but this market
is more suited to long term trend following. Thin volumes and
low open interest can lead to exaggerated intraday moves and
price spikes.
Euro
Any trader trading currencies should trade the euro. Good
volume, high open interest and great long term trends, in addition
good volatility is present for day traders and its recent status
as a safe haven currency, means it is suitable for all traders.
Japanese Yen
The Yen offers fantastic long-term trends and offers some
excellent volatility for day traders. Its slightly more erratic
short-term price spikes than the euro, make it a currency that
can produce more “false” signals than the euro, but generally,
it is a great currency to trade. Like the euro volume and open
interest is high.
Swiss Franc
In recent years the Swiss economy has become more integrated
with Europe’s and the currency has a higher correlation to the
euro, but it still represents a currency with great long term
trends making it suitable for long term position traders. Like
the British pound, volumes are not as high as the euro or yen
and day trading conditions are not so good.
Australian Dollar
Quite thin volumes and large price spikes occur in Australian
dollar, but it does offer good long-term trends and a diversification
away from the major currencies.
Canadian Dollar
The Canadian Dollar is very similar to the Australian dollar.
It offers good long-term trends and a diversification away from
the major currencies; again, it is suitable for long-term trend
followers and not day traders.
The Best Currency to Trade:
All traders should consider the Yen and Euro. If we had
to pick just one, we would be in favor of the euro.
You should always consider the Swiss Franc and British Pound
- if you are trading a basket of currencies, but you should
also consider the Australian and Canadian dollar.
While traders often neglect the Australian and Canadian
dollar, they offer an important advantage in terms of diversification.
Diversification enable currency traders to spread risk and
this can increase overall capital gains and help reduce risk
and volatility.
So, with regard to best currencies start with euro and yen
and add other currencies in for diversification and reduction
of risk.
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