Forex Trading - Are The Major Currency Pairs The Most Profitable?

There are many different ways you can try and profit from the forex markets

. You can employ a trading strategy and trade any of the 120+ pairs that provide you a decent set-up, or you could focus your attention on just the major currency pairs. My own opinion is that you are generally better off just trading the major pairs. Let me explain why.

First of all it's always a good idea to trade the same pairs that most other traders are trading. That's because they are widely traded and will respond very well to technical analysis. It's hard to explain why but it's probably because so many people are looking at the same indicators, the same fibonacci levels and the same areas of support and resistance. So therefore many people will buy and sell these currency pairs at the same times, helping to create predictable price moves.

The pairs that are most widely traded, ie the major currency pairs, are the GBP/USD, EUR/USD, EUR/GBP, USD/JPY, EUR/JPY, GBP/JPY, USD/CAD and USD/CHF pairs. Therefore these are the ones you should focus on trading in my opinion.

The major advantage you have is that all of these pairs have very tight spreads, which makes things a lot easier. This is because it's obviously a lot easier to take intraday positions on pairs that have a 2-3 point spread rather than some of the more exotic pairs which may have a spread of 10 points or more.

Of course if you are taking long-term positions then the spread isn't really an issue. However I would still favour the major currency pairs even as a long-term trader because they are easier to predict and there is a lot more information available about the individual economies concerned, and their future prospects.

So overall I would say that the major currency pairs are indeed the most profitable ones to trade, whether you are a short-term trader or a long-term trader. Not only do they have tighter spreads, but they also conform extremely well to technical analysis, because so many traders from around the world are observing the same price patterns.

Forex trading is all about placing the odds in your favour to create high probability set-ups, and in my view the best way to do this is to concentrate solely on trading the most actively traded pairs. I like to trade just five different pairs, but if you wanted to you could simply trade one or two pairs, such as the GBP/USD and EUR/USD pairs, but ultimately it is of course entirely down to you to see which option is the most profitable.

by: James Woolley

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