The Best Forex Pairs to Trade: A Complete Guide for Beginners

Forex trading, or the foreign exchange market, is one of the largest and most liquid financial markets in the world. Every day, billions of dollars are traded as currencies are bought and sold globally. For traders, the key to success often lies in choosing the right forex pairs to trade. Selecting the best currency pairs can significantly impact your profitability and trading experience.

In this guide, we’ll explore the different types of forex pairs, the best options for beginners and advanced traders, and tips for selecting pairs that align with your goals.

1. What Are Forex Pairs?

In forex trading, currencies are traded in pairs. Each pair represents the exchange rate between two currencies, showing how much of one currency is needed to buy a unit of the other. For example, in the EUR/USD pair, the euro is the base currency, and the U.S. dollar is the quote currency.

Forex pairs are categorized into three main groups: major pairs, minor pairs, and exotic pairs.

1.1. Understanding Major, Minor, and Exotic Pairs

• Major Pairs:

  These are the most traded pairs in the forex market and include currencies from the world’s largest economies paired with the US Dollar. Examples include EUR/USD, USD/JPY, and GBP/USD. They typically offer high liquidity, tight spreads, and lower transaction costs.
  
  

• Minor Pairs:

  These involve currencies from major economies but exclude the U.S. dollar. Popular forex minor pairs are EUR/GBP, AUD/JPY, and NZD/CAD. While still relatively liquid, they tend to have higher spreads than major pairs.
  
  

• Exotic Pairs:

  Exotic pairs most often involve one major currency and one from an emerging or smaller economy, such as USD/SEK (U.S. Dollar/Swedish Krona) or EUR/TRY (Euro/Turkish Lira). Sometimes, crosses between smaller economies are also possible, i.e. NOK/SEK (Norwegian Krona/Swedish Krona). They are less liquid, have wider spreads, and are more volatile, making them harder to trade.

2. Factors to Consider When Choosing Forex Pairs

Selecting the right forex pairs isn’t just about preference—it requires analysis and strategy. Here are key factors to keep in mind:

• Liquidity and Trading Volume:

  Major pairs tend to be the most liquid, making them easier to trade especially for shorter term traders, with tighter spreads and lower commissions.
  
  

• Volatility and Risk Management:

  High volatility pairs like GBP/JPY can offer significant profit opportunities but also carry higher risks. Beginners might prefer less volatile pairs like the EUR/USD.
  
  

• Market Hours and Overlap Periods:

  Some pairs perform better during specific trading sessions. For example, USD pairs are more active during the New York session, while EUR pairs more often shine during the London session. Trading forex pairs that are most active during your trading times is, therefore, an important criterion when selecting the right forex pair.
  
  

• Economic and Political Stability:

  Stable economies tend to produce more predictable currency movements, while unstable regions can lead to erratic price changes.

3. The Best Forex Pairs for Beginners

If you’re new to forex trading, it’s best to start with pairs that are stable, liquid with low transaction costs, and have predictable price movements. Here are some beginner-friendly options:

• EUR/USD:

  As the most traded pair in the world, EUR/USD offers high liquidity, low spreads, and relatively low volatility, making it ideal for beginners.
  
  

• USD/JPY:

  Known for its stability and predictable trends, this pair is a favorite for traders looking to minimize risk.
  
  

• GBP/USD:

  While slightly more volatile than EUR/USD, this pair is still manageable for beginners and offers good trading opportunities.
  
  

These pairs provide an excellent starting point for traders to build their skills and gain confidence in the market.

4. The Best Forex Pairs for Advanced Traders

Experienced traders often seek pairs that offer higher volatility and greater profit potential despite greater risk. Here are some popular choices:

• GBP/JPY:

  Dubbed the “beast” for its large price movements, this pair is highly volatile and ideal for traders who thrive on quick market changes.
  
  

• EUR/GBP:

  Perfect for advanced technical analysis, this pair often moves within predictable ranges, making it suitable for range traders.
  
  

• AUD/USD and NZD/USD:

  These commodity-linked pairs are influenced by global economic conditions, offering opportunities for diversification.

5. Exotic Forex Pairs: Are They Worth Trading?

Exotic pairs can be enticing due to their potential for high returns, but they come with added risks.

• Pros:

  Exotic pairs often experience larger price swings, creating opportunities for substantial profits.
  
  

• Cons:

  They have low liquidity, wider spreads, and higher susceptibility to market manipulation. This makes them unsuitable for most beginners.

Popular exotic pairs include USD/TRY (U.S. dollar/Turkish lira) and EUR/ZAR (euro/South African rand). In our opinion, you do not need to trade them, as the majors and minors offer enough opportunities in the forex market to make substantial gains. But in the end, it is up to the individual trader, of course.

6. Tips for Trading Forex Pairs Successfully

To trade forex pairs effectively, consider these tips:

1. Choose Pairs That Match Your Trading Style:

   Beginners should focus on major pairs, while advanced traders can explore minor and exotic pairs.
   
   

2. Stay Informed About Economic News:

   Currency values are heavily influenced by economic indicators like GDP, interest rates, and employment data.
   
   

3. Use Technical and Fundamental Analysis:

   Combine chart analysis with macroeconomic data to make informed decisions.
   
   

4. Practice Risk Management:

   Use stop-loss orders and manage your position sizes to protect your capital.

By applying these strategies, you can improve your chances of success in the forex market.

7. Essential Elements to Track in Your Forex Trading Journal

A well-maintained trading journal is a powerful tool for improving your forex performance. By recording key details of each trade, you can analyze patterns, identify strengths and weaknesses, and refine your strategy over time. Below are the essential elements every forex trader should track in their trading journal to maximize their learning and profitability.

1. Time of Trade and Market Session

The time of your trade plays a crucial role in its outcome, as different forex pairs exhibit varying levels of volatility and liquidity depending on the trading session. This can easily be done with Edgewonk's custom statistics.

• Track whether your trades occur during the Asian, London, or New York session, and observe how each session affects price movements.

• Identify whether your most profitable trades align with high-liquidity periods, such as the London-New York session overlap.

• Look for trends in how different currency pairs behave at specific times and adjust your trading strategy accordingly.

2. Impact of Economic News and Events

News releases can trigger sharp price movements, making it essential to track their impact on your trades.

• Set up a Custom Statistic in your Edgewonk trading journal to record major economic events (e.g., interest rate decisions, GDP reports, or employment data).

• Determine whether your strategy performs better in stable market conditions or thrives during high-volatility news events.

• If news consistently disrupts your trades, consider adjusting your entry and exit strategies to avoid unnecessary risks.
  
  

3. Stop-Loss Placement and Volatility Adjustments

Each forex pair has its own volatility profile, affecting how wide or tight your stop-loss should be.

• Track how often your trades hit stop-loss levels and compare this with the pair’s average daily range (ADR).

• Identify whether you’re placing stops too close (resulting in premature exits) or too far (leading to a lower reward:risk ratio).

• Adjust your risk management strategy based on the volatility characteristics of the pairs you trade.
  
  

4. Trade Management and Exit Strategy

Managing trades effectively can make a significant difference in profitability.

• Analyze how different forex pairs require different trade management techniques. For example:

  • High-volatility pairs (e.g., GBP/JPY) might require a more conservative stop-loss trailing approach to prevent being stopped out too early.

  • Lower-volatility pairs (e.g., EUR/USD) may benefit from a more aggressive approach to lock in profits gradually.

• Use Edgewonk’s trade management feature to track whether holding trades longer or taking profits earlier yields better results for your strategy.

Conclusion: Finding Your Ideal Forex Pairs

Choosing the right forex pairs is a critical step toward trading success. Start with major pairs to build your skills and gradually explore minor and exotic pairs as you gain experience. Remember, your choice of currency pairs should align with your trading style, risk tolerance, and market knowledge.

Whether you’re a beginner or an advanced trader, the forex market offers endless opportunities to grow your portfolio and achieve financial goals. And don’t forget to journal all your trades in Edgewonk to improve continually!