Many forex traders commit one of the biggest mistakes when they don’t know that deciding correctly what to trade and which direction is 90% of the battle to turn a profit. Sady, most traders focus on trying to master entry methods, not thinking that if they correctly pick what is going to up today, then the exact entry method they use will not make much difference to their trading results.
Not a Priority
Many traders are keen to start gaining lots of money. And the way to do this quickly is to trade using smaller timeframes, so they are told. People see that several currency pairs have lower spreads and decide they must pick such low-spread pairs to trade to save costs. One more common reasoning is that it makes sense to trade the most active currencies during traders’ preferred operation time. Furthermore, an argument states that every currency pair has ‘personality,’ and traders must get as much experience they could in trading some pairs to get to know them and trade more successfully.
The issue here is that they are far from being the most important consideration that should affect which currency pairs to trade.
Main Factor to Use
Let’s use an analogy to the gambling world to simplify the issue. For instance, a man goes into a casino to play a game that needs other people to risk money to give him a chance to make a profit – the wins will come from their losses. And this is an excellent comparison to the forex market that works the same way.
So, the man goes to the busiest table, with most players and money on the table. Seeing that, why would forex be any different? Traders should be trading the ‘busiest’ currencies at any given time, be there where the action is. And a way to know that is to try reading the forex news to spot the most significant things currently happening in the market.
Even if the forex is ‘over the counter,’ reliable statistics tell which currencies are traded the most – which currencies are exchanged in enormous volumes.
Narrowing the Field
As people discover that it is only worth watching some currency pairs, they will find it easier to know which ones to be trading any day. The process to use to answer this question in detail is: which of these currency pairs might have the most volatility? Traders need volatility because when the price does not move, how will they make any money? They must buy and sell at the widest price differentials they could find, to make the greatest profit. There are some ways to foresee where the market volatility might be.
Also, don’t forget to watch the economic calendar to know when the major central bank or most important economic data releases are set for the major currencies. Traders can see that if they are in a trade before those releases. And they could provide them with the volatility they need to make the trade a big winner or show where some volatility might appear.