As most binary options traders know, binary options trading can use currencies as an underlying asset choice. The trading of currencies in the binary options market is a lot easier than trading directly on the Forex market. The opportunity to trade currency via the binary options market offers traders several benefits, such as:
- Access to the largest financial market in the world
- Sufficient liquidity
- Trading of various currencies around the clock
- Knowledge of exact income on in-the-money trades
- Simple risk management
This raises the question then of what is the best currency pair to trade. This is not so easy to answer, because each currency pair has its own personality, and every trader also has his or her own personality.
Essentially, deciding upon the best currency pair to trade is simply a matter of finding your own personal advantage in the market. Moreover, it of course also depends on what time of day a trader prefers to trade . For example, those who wish to trade in Asian currency should choose Yen currency pairs, even though the GBP/USD is a more popular currency pair to trade .
Here are some additional currency pair trading tips.
The EUR/USD currency pair has the highest order flow and thus the best liquidity in the entire forex market. You need not be afraid of possible slippage (with few exceptions), and your trades will always be executed immediately.
Also, trading of EUR/USD currency pairs will typically have a lower amount of volatility. Therefore, this currency pair is particularly suitable for beginners. Another advantage is the very low spread, especially if you are considered to be a scalping trader.
USD/JPY & USD/CHF
With USDJPY and USD/CHF currency pairs, traders may also have an advantage. These currency pairs have a very strong order flow, however, these currency pairs sometimes have too little “action.”
In the AUD/USD and USD/CAD currency pairs, the liquidity is a lot less. Therefore, their movements are sometimes very surprising and there are often unexpected reversals.
The AUD/USD and USD/CAD are often referred to as commodity currency pairs, as their prices correlate strongly with gold and oil. Australia is a large producer of gold and therefore the price of AUD/USD is typically influenced by the price of gold. Likewise, Canada is one of the largest oil producers worldwide, and therefore the price of the USDCAD often depends closely with the price of oil.
The GBPJPY is very volatile and therefore suitable only for more experienced binary options traders. This volatility is especially present when Japan publishes new economic data, causing drastic movements in the currency values.
The GBP/USD is also a very solid currency pair for beginners to the binary options trading arena. Here you will find very good liquidity and very good movements. The GBP/USD is slightly more volatile than the EUR/USD, but not as volatile as trading the GBP/JPY currency pair.
It is suggested that beginners to the binary options trading market should initially focus first on the EUR/USD and the GBP/USD currency pairs. In order to ultimately find the best currency pair for yourself, it helps to test, test, test. In doing so, traders should initially put very small sums into these trades, and then document all trades in a trading journal. If you see that your strategy works in the relevant currency pair (you’d need about 100 trades so that the statistical significance is also relevant), then you can scale up and increase your investments.
Another final tip: If you’re really interested in trading the Forex through binary options and you want to know the background and strategies in more detail, we recommend the book “