Which FX Pairs Should You Trade?

In this weekly video:
00:25 – Which currency pairs should I look at?
00:47 – It doesn’t matter where you live and what you trade
01:11 – Don’t just focus on the Major pairs
02:00 – Stick to the main 8 currencies
02:50 – What is the best technical setup – find that and trade it
03:48 – I also focus on strength and weakness
04:10 – What has the path of least resistance?
05:50 – Use Profiles to make life easy

How do you decide what currency pairs to trade as a Forex trader? Let’s get into that and more right now.

Hi, Forex traders, Andrew Mitchem here, the owner of The Forex Trading Coach. This is video and podcast number 235.

Which currency pairs should I look at?

Now I get a lot of questions saying, “Hey, Andrew, can you tell me which currency pairs I should be trading? Which should I be focusing on?” Because it’s quite difficult for people to know which currencies to look at, there is so many obviously there to look at. And it’s a thing that confuses so many people. So let me give to you some tips and some helpful information of how I go through this process.

It doesn’t matter where you live and what you trade

First of all, it doesn’t matter where you live. A lot of people say they live in the UK, and they say, “I want to only trade the British pound pairs.” A lot of people live in Canada only want to trade the Canadian pairs. It doesn’t matter. Just because I live in New Zealand doesn’t mean to say I just trade New Zealand dollar pairs. It really does not matter.

Don’t just focus on the Major pairs

The other thing to be careful of is, a lot of people also say, “Just focus on the major pairs.” Like the euro US, the pound US, US Swiss franc, Aussie US, US yen, etc., US Canadian.” The problem is you’ll notice they all contain the US, so therefore what you are trading is very heavily dependent on the direction and the strength or weakness of the US dollar at that time.

So if you are generally trading the major pairs only, then half of what you are trading is focused on what the US dollar is doing. So that means you are either going to be completely right or completely wrong on the vast majority of those trades that you take if they are all correlated. So for me it’s like definitely look at some of those minor pairs and the exotic pairs, but only to a degree.

Stick to the main 8 currencies

I personally don’t go trading Norwegian kroners and South African rand and all that. I just stick to the majors which are the US dollar, the euro, the pound, Swiss franc, British pound, the Aussie, Kiwi and the Canadian. I might have missed one, but the main eight. And so stick to those and the combinations of each other.

So as an example. I’ve taken a trade today on the New Zealand Canadian dollar. It’s fine because it’s taking two of the main currencies, and it could be like the Australian dollar against the yen, it could be something like the Canadian Swiss franc, it could be a combination of those. So personally I’d stick to those main eight currencies and combination of each of them. So it doesn’t matter where you live in the world or what your local currency is or what your account is denominated in, none of that really matters.

What is the best technical setup – find that and trade it

To me as a technical trader it’s all about what is showing the best setup right at the time that I’m taking the trade. Now I only have a look at a chart upon the completion of a candle. So if I’m looking at a daily chart, it’s only once a day. If it’s a four-hour chart, it’s once every four hours.

And actually you probably know I’ve got some great software that I have for myself and my clients to trade. We look at offline charts which are non-standard MT4 charts and we get tremendous success on those charts and there are charts such as six hours, eight hours and 12 hour charts.

Great thing about a 12-hour chart, you just need to look twice a day, and that’s it. And it’s only at the completion of the candle, because we are taking retracement orders we don’t even need to be there at exactly the time the candle closes. You’ve got a lot of time on a 12-hour chart to be able to get to your computer and place a trade, many hours.

So it’s all about the technical trades, that’s how I decide which currency pairs I’m gonna trade at the time.

I also focus on strength and weakness

Yes, so your strength and weakness, as you know I focus a lot on strength and weakness because it makes logical sense. If the New Zealand dollars looking really strong, and the Canadian dollars looking really weak, then obviously I should be focusing on looking for buy trades on the New Zealand Canadian dollar if they show because it adds more probability to the trade.

What has the path of least resistance?

I also need to look at the chart what is giving me the best technical setup, what has the least path of resistance in its way, what has no …? Let’s say we are buying, let’s say what has no previous swing highs nearby, what has a lot of room to move towards the upper Bollinger Band let’s say, what has no major near-term resistance in the way, what has a round number I can use as a stop-loss to protect my stop-loss below my buy trade? All sorts of things like that that I’m looking for, what has a trend line break, what has divergence, what has daily strength and weakness?

All those things, put them together to form the technical chart pattern, the setup, the candle pattern that we are looking for that has lots of multiple factors all showing at the same time to back it up. What has reasons to help protect the trade as in the stop-loss, and what has a fewer paths of resistance? So therefore it’s giving my trade the best opportunity to get to my profit target.

Put all that together, and I don’t really care whether it’s the New Zealand against the Canadian or the US against the yen or the British pound against the Aussie dollar, it doesn’t really matter too much because it’s technically getting the setup right on the timeframe that I’m looking at, on the pair that I’m looking at.

Put all that together, has it got room to move? Yes. Is it giving me a high reward to risk? Yes. Is there protection for the trade? Yes. Technical setup? Yes. Has it got strength and weakness from the daily or even the weekly chart backing it up? Yes, it does. Take the trade. It really does need to come down to be as simple as that to select which trade do you take and which currency pairs.

Use Profiles to make life easy

Use profiles on MT4, so put all the currency pairs on say four-hour charts and then daily charts or weekly charts. So any other timeframes altogether as a profile on MT4 makes it then very easy to go through and select your profile. I know that in an hour from now I’ve got the four-hour charts changing over. Select the four-hour charts, scan through the charts. Any technical setups? Yes, maybe, no, no, no, whatever it might be, take the trade. Come back and look four hours later for another potential trade setup again.

So I hope that helps. This is Andrew Mitchem of The Forex Trading Coach. Have a great weekend. I’ll see you this time next week.

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