This article looks at the most commonly traded currency pairs on the forex Australia market.
When you trade on the forex Australia market you will see that all trading is done with currency pairs. New traders are told that they should look at the most commonly traded currency pairs when they start. However, there are many new traders who do not know what these commonly traded currency pairs are. It is important that you know what these pairs are and why you should look at trading with them.
Why You Use Currency Pairs on the Forex Australia Market
Before you look at the commonly traded currency pairs you should consider why you are going to be trading with currency pairs. When you trade on the forex Australia market you are going to be trading on the foreign exchange rates. In order to create a foreign exchange rate you will need to have two currencies. These currencies are the one that you have and the one that you want to convert the first currency into. These two currencies are what make up the currency pairs that you trade with.
The Commonly Traded Currencies
The most commonly traded currency pairs are made up of the most commonly traded currencies. There are eight commonly traded currencies that you should know about. These are the US dollar, the Euro, the British pound, the Canadian dollar, the Swiss franc, the Japanese yen, the New Zealand dollar and the Australian dollar.
The most commonly used currency on the forex market is the US dollar and this will be part of 80% of the trades that are completed. The Euro is the second most popular currency and will be in around 60% of the trades. The other currencies will also be in large numbers, but they do not compare to these two currencies.
The Most Commonly Traded Currency Pairs
There are many traders who assume that when you combine the 8 most commonly traded currencies you will get all the commonly traded currency pairs. This is not actually true because there are only 18 commonly traded currency pairs. If you were to combine all of the commonly traded currencies you will get 27 currency pair.
The reason why 9 of the currency pairs are not part of the commonly traded currency pairs is due to their liquidity. The liquidity of the currency pair is not created by the retail trader, but by the major players on the market. These major players will only trade the 18 common currency pairs in high volumes.
When you do not have high liquidity then you are not going to be able to trade very well with the currency pair. There are a number of problems that will come from the use of currency pairs that do not have sufficient liquidity.
Why New Traders Need Common Currency Pairs
New traders are told that they should look at the use of commonly traded currency pairs. The primary reason for this is that these currency pairs offer the best trading for the new trader. The movements are easier to follow, there are more trading tools for the currency pairs and the information that you need will be easier to obtain.