Facilitating the exchange of one currency for another, the Forex market is the largest and most liquid market in the world. Since currencies on the Forex market are traded in pairs relative to each other, some of the first questions a trader needs to answer is which currency pairs are best to trade, and when to enter and exit the market.
In this article, we discuss major currency pairs, how to know when to buy or sell in Forex, and tools to improve your decision-making process.
- What to trade on Forex
- How to buy and sell Forex assets
- Example of a Forex trading strategy
- Trade your way
Interact with the underlined words and green dots to get additional details and explanations.
Explanations and definitions of terms.
What to trade on Forex
First of all, we should pay attention to major currency pairs. These pairs show how the US dollar performs against each of the other six major currencies:
EUR/USD is the most popular Forex asset in the world and we recommend beginners start their trading journey with it. Because of its great liquidity, this currency pair is well-balanced in terms of technical analysis. USD/JPY is a very trendy asset and is characterized by powerful price movements. At the same time, USD/CHF is more relaxed, and thus more suitable for traders avoiding high volatility.
Each trader has his or her own trading style, wherein some currency pairs suit better and others less. Try trading on all of them to figure out which works best for you.
How to buy and sell Forex assets
The second, but no less important, question a trader might ask is how to know when to buy or sell in Forex.
There are two major approaches to answering this question: technical and fundamental analysis.
Fundamental analysis 📰
If we’re trading on Forex, we are trading national currencies. That means we need to follow key economic news (interest rate, inflation, unemployment rate, etc.) for both the currencies we’re trading. Even if you don’t trade entirely based on the news, you should be aware of the economic calendar’s release schedule and be prepared for your strategies to not go as planned during certain periods. You can read more about fundamental analysis in this article or go to Olymp Trade Insights for news-based price projections.
Technical analysis 📈
This type of analysis includes using different indicators, graphical elements and statistical analyses in order to determine an asset’s future price movement. In most cases, traders create their own trading strategies or use ready-made ones, which can give some insight into how to buy and sell Forex assets. Check out the top five Forex trading strategies to get started on developing your own.
You can also find ready-made trading strategies on Olymp Trade by clicking on the Trading Strategies tab in the Technical Analysis side window. Some strategies are available to all users, some are provided as an award for progressing through Trader’s Way, and others can be purchased in the Market.
Example of a Forex trading strategy
Now for the final big question when trading Forex, how to buy and sell currency pairs by putting your analyses to use. Let’s start by examining the fundamental background of the EUR/USD pair:
- Throughout 2022, the USD has strengthened against all other currencies in an unprecedented way.
- Parity with EUR was achieved (the currency pair reached the value of 1) and overcome.
- Central banks of all developed countries began to raise interest rates on the back of record inflation.
- Absolutely all markets have been falling throughout the year, except for that of the US dollar.
From a technical analysis point of view, a clear downtrend can be seen in EUR/USD. This means that it’s worth considering primarily Down trades.
You don’t have to use a bunch of complicated indicators for technical analysis. You can add just one simple moving average with a period of 20 to the chart and make a trade where the chart crosses with the moving average.
Where the chart crosses the SMA 20 from top to bottom is a good point to open Down trades. They will be in line with the price movement’s general direction and have a better chance of closing with a profit.
Similarly, it is possible to trade Up, too. The USD/JPY, for example, has a pronounced uptrend. If the chart crosses the SMA 20 from below to above, it’s possible to open excellent Up trades.
Read more: Basics of trendline strategy
Trade your way
Every kind of market has its own peculiarities when it comes to trading. There are nuances unique to trading metals, oil and cryptocurrencies. To understand which strategies suit you best, you should try them all out and determine your own trading style. As with FTT or Forex trading, understanding what works best comes with experience.
Join Olymp Trade and hone your trading skills using the free educational material in this blog. The platform’s wealth of tools and guides are tailored to supporting both beginner and experienced traders, and our educational material, including webinars and other instructional videos, are free and available to everyone. Set your own financial goals and reach them with us!Go to Olymp Trade
Risk warning: The contents of this article do not constitute investment advice, and you bear sole responsibility for your trading activity and/or trading results.
How easily an asset can be turned into ready cash without affecting its market price.
Analyzing current and historical market data to identify price trends and predict price movements.