If you want an additional source of income that does not require a huge investment, you should consider trading currency pairs. Foreign Exchange is where you exchange currencies and benefit from the differences in their exchange rates. These exchanges are taking place all around the world because Forex is a decentralized market with no one entity controlling it. Compare Forex with stock market and you will be surprised how big Forex is. Investing in currencies can help you create a stable source of income. However, there are things that you have to know before being an active trader of currency pairs.
First, let’s take a look at the many things you have to consider before investing in Forex, and then you will see the best currency pairs you can trade in 2019.
Things to Consider before Trading Currency Pairs
Factors Affecting Currency Value
Since you will be trading currencies, you have to know what affects the value of currencies. That will help you predict the price movement of any currency in the market. Inflation, interest rates, economic growth, and political conditions affect the value of currencies majorly. Keep track of what’s going on in a country to know where its currency’s value will be in the coming days.
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It Takes Time to Profit Considerably
At times, marketers would try to make it seem as though you can become a millionaire in just a few days of trading. That’s not true at all. It takes time for you to earn the amount of money that you have been dreaming of. You always have to start small i.e. go for small trades with small profits. You should put only as much money on the line as you are confident.
Risks Are Big but Preventable
While some believe Forex is all about profits, others believe they can never profit and become a millionaire while trading currencies. You have to avoid any extreme side of the spectrum. When done right, Forex trading can make you a millionaire. You have to learn to control your risks or minimize them to be precise. There are many ways to do that.
Leverages Are Misunderstood
Many new traders end up misunderstanding leverages. They believe leverage is there to make them profit big time. Of course, if it works, it will help you make much bigger profits than you can make with the funds in your account. However, leverage amplifies your losses just as much too. Learn to use the power of leverage only at the right times.
Emotions Are Your Enemies
If there is one thing you have to avoid while trading currencies, it is the emotional side of your character. Emotions can make you do bad things. When you win, your emotions will make you trade more and more. As a result of which, you might end up incurring a huge loss. When you lose, your emotions will push you to trade more unless you are successful. In the meantime, you will end up losing a lot of money. Keep your emotions out of it – it is as simple as that.
It Is Not Always about Increasing Value
Some new traders are under the impression that the only right way to trade Forex is by selling some currency when its value rises. That’s not the end of it all. You have to learn to get rid of a currency to prevent big losses too. So at times, you sell a currency only because you know its value it going to go down big time in the coming days.
There’s Learning on the Go
Forex is all about learning as you trade. You can’t become a professional through training and tutorials. Yes, you will learn the basics. However, the complexities and intricacies of Forex trading are only known to those who trade regularly. You don’t trade with rigid strategies once you have learned this art. You make adjustments on the go.
The Best Currency Pairs to Trade in 2019
USD/GBP
You can’t call it the most volatile of all currency pairs, but it is still more volatile than USD/EUR. There are many other reasons to invest your money in this currency pairs in addition to its volatility. First, you will find a lot of information about this currency pair. It is one of the most popular currency pairs out there so you can find charts, graphs, expert opinions, prediction tools, analytical data, and anything you want to help you with your speculation. In addition to that, the current state of affairs between the US and the Great Britain has also to contribute towards the volatility of the currency pair.
If you look at the data during the months of September and October, you can see that the pair has been going up and down quite significantly. That’s a good sign for those who want to make small profits on a short term basis. One can enter a trade, let the price of one of the currencies rise within a few hours, and exit the trade when suitable. The big price movements have been a result of Trump Presidency and the policies that have been pushing the European countries to move away from dollar as a major currency for foreign trades. Keep an eye on this currency pair and take advantage of the dynamic nature of it in 2019.
EUR/USD
This is yet another popular currency pair. Normally, you would expect it to be one of the stable currency pairs, but that is not the case in 2019. If you are looking for a currency pair that shows signs of life, it is this. The EUR/USD charts show a lot of drama in the recent days. Since the arrival of Trump in the office, EUR/USD charts have been showing some unprecedented movements. If you look at the charts, 2019 started out pretty good for Euro. However, the European currency started to go down in value against the USD as you moved further into 2019. It is near the lowest of the year as the month of October starts.
At the time of writing this i.e. October 8, 2019, the EUR/USD pair is trading at 1.14874. That’s quite low when you compare it to their trading value at the start of the year. For example, on February 2, 2019, the pair was trading at 1.25098. These differences are huge when you compare the history of this pair. Once again, the reason for such huge price movement is the Trump administration. Trump has been pushing EU to shift away from its dependence on USD. European banks have started converting their dollar reserves into Chinese Yuan. You have to be at the best of your analysis when going long or short on this pair.
USD/JPY
There is no doubt about the fact that US dollar is getting strong in the global market due to the strict policies from Trump Presidency. Whether that’s a good thing or not depends on how you see the entire scenario. If you are a trader looking to benefit from the differences in their exchange rates, these are the best times to make good profits from trading Forex currency pairs. On the other hand, it might not be so good for the US because of how the strong and expensive dollar is pushing many countries to developing systems wherein they don’t have to rely on USD at all.
The volatility is there in this currency pair, especially in the current year. If you pick the data from the start of September to the start of October 2018, you will notice that USD has been rising steadily against the Japanese Yen. It requires your speculation and analysis to know what the currency pair will see in the coming days. Will USD keep rising in value or some Tweet from the president of the United States cause the USD to fall. One thing to keep in mind is that Trump has made several comments in 2018 that resulted in sudden drop in the price of USD, but none of the price drops could hold for a long time and the USD recovered pretty quickly.
At the start of September 2018, USD/JPY pair was trading at around 110 whereas the trading value has gone up to around 113.7XXXX on October 8, 2018. It does to show that the most popular and the stable currency pairs are the most volatile pairs of 2018.
USD/CNY
Another currency pair showing a lot of turbulence, and unsurprisingly so, is the USD to CNY. One must not forget the trade tensions that are currently shaping up the relationship between the US and China. The two countries have been fighting a trade war in 2018 with the first brutal tariffs coming from the US at the start of 2018. These two of the biggest economies of the world have been fighting with each other on the basis of their trading strength. While it was known from the start that US was going to put more pressure on China due to it having the upper hand based on the volume of trade, experts have also predicted isolation for the US.
What happens in the future is yet to be seen. However, the currency pair has shown some extraordinary movements in this one year. Chinese Yuan started out pretty strong against the USD at the start of 2018, however, it started losing value with time. Trump’s attempts of keeping the USD weak have not seen any fruitful results. The boosts in interest rates from the Fed have been making the USD stronger with time. The rise of USD against CNY started truly in the month of May and that rise continues to this day in October.
On February, the USD/CNY currency pair was trading at 6.26977 whereas the same pair is trading on October 8, 2018 at 6.89258. the turbulence will continue in the coming days as the two countries decide what the nature of their trade relationships will be in the coming days.
GBP/NZD
One unique currency pair is the Pound Sterling to New Zealand Dollar. This currency pair has shown a lot of movement in 2018. They both have been going up and down frequently in a matter of days. It is amazing to the see the chart between GBP and NZD as it look more like a tug of war. They keep dominating each other in different months. It can be quite difficult for a new trader to predict which direction the currency pair will move in. It is highly recommended, therefore, that you tune into the news and stay up-to-date with any new events to speculate on this currency pair.
The month of January was strong for Pound Sterling as it maintained a high value against the New Zealand Dollar for the whole month. NZD bounced back in February but could not retain that position for a long time as GBP kept a very strong position in the months of April and May. There were not any significant movements in the months of July and August. However, the volatility meter has been going to places since the start of September. At the end of August, the GBP/NZD currency pair was trading at 1.91722. On the other hand, the currency pair is trading at 2.02600 on October 8, 2018 i.e. at the time of writing this.
Conclusion
It is amazing that the currency pairs that usually show signs of stability and very little volatility are the most volatile currency pairs in 2019. There is no doubt that the global economy is experiencing some events that are out of the ordinary. Various countries are fighting their dependence on dollar for trading and considering systems in which they can use their own currencies to conduct trades with other countries. Trump Presidency has shown the not-so-friendly attitude even to its allies, and that’s why countries and regions like Canada, EU, Great Britain, China, etc. are looking for alternatives to trading with the US. That has given rise to this unprecedented volatility in the most popular currency pairs. Anyone who wishes to step into Forex trading these days should definitely spend some time learning with a professional trader before putting their money on the line.
