Currency Trading Tips – Choosing the Perfect Pair

Should it be Pounds for Bucks? Or Loonies for Aussies? What about Kiwis for Swissies this time? We’re not talking chocolate bars. But we’ve just dished out some of the most common currencies in the forex trading arena, and how they are fondly called by traders. To recap, the GBP is also called Cable, Pound or Sterling, while the USD is also knows as Greenback or Buck, for short. The Swiss franc is fondly called Swissie, while the Australian dollar is best known as Aussie. We don’t need to explain while the New Zealand dollar is called Kiwi but it’s a mystery how the Canadian dollar has come to be known as Loonie.

Now that you can pretty much speak the basic FX jargon, the next important thing in your list of currency trading tips should be how to choose which currency pair is perfect to trade. Currency pairs are classified into three basic types: the major currency pairs, the cross pairs, and the exotic pairs. Each type has its own advantages and disadvantages, and choosing from any of them will require that you look into the following factors:

1. The spread: A “spread” is the difference between the long position in one currency and the short position in the other. It can also mean the difference in currency prices from one delivery date to another. A tighter spread indicates more profit because you have enough elbow room for price movements.

2. The chart: Charts that contain technical indicators of the strength of a currency against another can also help you choose the perfect pair. By looking at charts, you will be able to see the trends between currency pairs, giving you information about their volatility.

3. Time to trade? Finally, choosing the right time for trading can also indirectly help you pick out the perfect currency trade. The best time to trade is when most of the markets are up and active. This is usually when the London forex market opens, especially that window coinciding with the active trading hours in the US. The high time will give you more options from which you can pick out the perfect currency pairs.

Timothy Stevens is a Forex Options Trader who owns http://www.NonDirectionTrading.com – He has helped hundreds of people on Trading Forex with Options.

He has recently developed a free eCourse showing you a step by step process for starting your Forex Trading easier. To learn how to start Forex Trading with Options without wasting your time and losing more money, visit http://www.NonDirectionTrading.com/members/FreeReport.htm