What Is The Best Currency For Forex

December 7, 2009 by Forex Guide
Filed under Forex Market

It seems that not a day goes by that I am not faced with the question of “what time frame should I use” or “what time frame do you prefer”.

The next most asked question seems to be “what currency pairs should I concentrate on”.

Many traders desire a one size fits all way of trading the forex, but the truth is that trading does not all fit into a one size box.

The most important aspect to come to terms with is that whether you are watching a tick flow or a daily chart, you are watching the same thing. It is just that the smaller the time frame, the closer you are looking.

Looking in close or looking from far away both have advantages and disadvantages.

Imagine that you were on a non-stop train that is thundering through a station. If you were to try to read any of the station signs, you would find it extremely difficult, but if from the same train you were looking at a house some miles in the distance, then you would get a perfect view from a gradual and continually changing perspective.

If you view something under a microscope, you will see great detail of part of the object. If you view the same object with your eyes, you would see more of the object but less of the detail.

So it is with time frames and trading.

Some traders state that you should avoid the smaller time frames because the smaller time frames incorporate “too much noise”. They say that the longer time frames are more robust –whatever that means.

My opinion is that it is best to look at the whole picture, and this means viewing from different time frames.

For example, if I were trading the Eur/Usd than I would want to start from far away. I would look at the 1 day chart and make a study of the trend. Then I would look at the lower time frames to see where price was within the cycle and so on. I certainly would not limit my study to any one particular time frame.

Likewise, when it comes to choosing a currency pair, there are a couple of considerations, not least my preferred trading style.

For those who prefer to trade very short term, a currency pair that is exhibiting good perceived volume (there is no true volume in forex trading as there is no central exchange) will be important, as will the time of day.

For traders who prefer longer term trading then trend will be a major factor, and the currency pair with the most established and accelerating trend will likely be of greatest interest.

In a nutshell, the best policy when forex trading is to be prepared to keep an open mind and study more rather than less.