Which Forex Pair Should I Start Trading?

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by John on March 18th, 2008 // Filed Under » Trading Q&A

Here’s another question from a trader:

In Ten New Trader Pitfalls you mention that a trader must trade in the right market(s). For forex trading, which market(s) you suggest for a beginner to start with? Should she concentrate only on one currency pair and gain necessary knowledge and insights in that market before start adding another one in her portfolio?

Let me address one thing first here. When I say “market” I mean stocks, forex, fixed income, commodities, etc. That being the case, I would not refer to a currency pair (which is what forex traders trade) as a market – at least not in this context.

The point of the article is that it’s important to pick the right broad market – stocks, fixed income, commodities, forex, etc. – which best suits you.

Going back to the question, I do believe that new forex traders should stick to one open position at a time because of the complexity with having multiple ones open. Now, that doesn’t mean I necessarily think traders should focus on just one pair. Whether they should or not depends on timeframe and methodology. Day and short-term traders will want to be very narrowly focuses, while longer term traders can (and probably should) widen things out. Trend traders need to look at lots of markets to generate sufficient opportunities, while other methodologies might be better suited with just a single pair.

In very general terms, EUR/USD tends to be the best one for newbies to trade. The P&L is easy to understand. It’s very liquid and active.

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