We trade 7 forex major pairs and a total of 28 currency pairs with the Now Forex trading system. Since our trading system accommodates so many pairs, it takes some traders a while to get used to trading this way. We will review the characteristics and traits of all 28 pairs along with a comparison of these characteristics. Characteristics like volatility, spreads and when these pairs move, etc. will be investigated.
Example Forex Major Pairs
A forex major pair is a currency pair with the USD on the left or right side of the pair. For example the EUR/USD and the USD/CHF are both forex major pairs. We trade a total of 7 major pairs with the Now Forex trading system. The other forex major pairs you can trade with our system include the GBP/USD, USD/CAD, USD/JPY, the AUD/USD and the NZD/USD.
List Of Currencies and Pairs
With the Now Forex system we trade eight currencies. These are the US Dollar, Canadian Dollar, Euro, British Pound, Swiss Franc, Japanese Yen, Australian Dollar and the New Zealand Dollar. Out of these 8 currencies, the three most actively traded and most liquid currencies are the USD, EUR, and JPY. Currencies like the CAD, NZD and AUD are commodity based currencies are correlated to the movements in the prices of oil and gold. The other currencies are more reserve based currencies, which are held in large quantities by governments and banks.
These eight currencies can be combined into 28 pairs. These 28 combinations include 7 major pairs and 21 exotic pairs. There are 7 forex major pairs like the EUR/USD and USD/JPY, and there are 21 exotic pairs, without the USD on the right or the left, that we trade with the Forexearlywarning system. The most frequently traded currency pairs are the EUR/USD, USD/JPY, and GBP/USD, which are all forex major pairs. Examples of exotic pairs would be the EUR/JPY or AUD/CAD. The most frequently traded exotic pairs are the EUR/JPY and EUR/GBP.
When Currency Pairs Move and Why
All 28 pairs can move in the main trading session. A few times per month AUD and NZD based pairs can move quite a bit in the Asian session after some related economic news drivers. These movements can carry forward to the main trading session and give sizable movements, but this only happens a few times per month. Be sure to check our complete article about trading in the Asian session
and also about the limitations. Also, the JPY pairs can move in the Asian session when they are in consistent up trends or downtrends on all pairs. If you check the economic calendar for the main trading session you can see how the European based pairs can move first followed by the USD and CAD pairs as the trading day progresses.
Just to be clear, all 28 pairs can move at any time the forex market is open, but the information in the above paragraph is accurate about 95% of the time.
Currency pair characteristics for causing price movement are pretty simple. Pairs move because one currency is strong or the other currency is weak, or both. There is absolutely no other reason to trade a pair looking to profit from the movement. If the EUR/USD is falling and USD/CHF is rising, it is because the USD is strong. We can trade 28 pairs. Most of the movement is in the main session with occasional movement in the Asian session, perhaps 3 times per month, this is the nature of the trading sessions. In the example below the NZD (New Zealand Dollar) is weak, and this causes price movement.
Volatility and Price Movement
The volatility of the 28 pairs we trade varies quite a bit. Comparing the volatility of one pair to another is easy by looking at the price quote, then subsequently moving a decimal point. For example if the price quote on the CAD/CHF is 0.7533 then a 1.00 percent movement is 75 pips, you determine this by moving the decimal point in the quote two places to the right. If the bid price is 1.1375 on the EUR/USD, then a 1.00 percent move is 114 pips, once again move the decimal place two places to the right. If the bid price on the GBP/NZD is 2.2986, then 1.00 percent is 230 pips. This means the GBP/NZD is more than 3 times as volatile as the CAD/CHF. All of the forex major pairs and all 28 pairs we trade pairs can be volatile after related news drivers, even in the Asian session.
Quotes, Swaps and Payouts and Spreads
How currency pairs are quoted varies somewhat. The EUR/USD can be quoted at 1.1358, the EUR/JPY can be quoted at 140.10 and the NZD/USD can be quoted at 0.6866. This takes some getting used to. Just remember that if all three pairs moved up 10 pip each only the two digits on the right would change. ie. the EUR/USD would then be 1.1368 and the NZD/USD would be 0.6876.
The spread is an indicator the daily trading volume for that particular pair. If the spread is 0.5 pips on the EUR/USD and 3.7 pips on the GBP/CAD, this means that the daily trading volumes on the EUR/USD are higher than the GBP/CAD. This makes sense because the EUR and USD are the two most commonly traded currencies and the spread is generally the lowest on this pair. So traders can conclude, as a general rule, that the lower the spread, the higher the liquidity. Look at the spreads on all 28 pairs we trade to get a feel for the liquidity. The spreads on the forex major pairs and all 28 pairs we trade are acceptable and are only somewhat high on one or two pairs. A list of some typical spreads for most of the 28 pairs is in the image below.
One of the currency pair characteristics that is variable is the pip value, or payout, it varies from pair to pair. The payout is the amount you get paid or lose for 1 pip of movement after you are in a live trade. The value of one pip of movement is always different between currency pairs because there are differences between the exchange rates of different currencies, and the currency your trading account is funded in.
If your account is funded in US Dollars, pip payouts range from about 70 cents on the AUD/NZD to about 1.60 on the EUR/GBP. It is not always exactly $1.00 for a one pip move, assuming a $10,000 (one mini lot) trade.
If your account is funded in US dollars, and you buy or sell the EUR/USD, which is $10,000 USD worth of Euros. If the price moves one pip the profit or loss will be $1 depending on which way it moved. But on an exotic currency pair
like the EUR/JPY you would have to take the current EUR exchange rate against the Yen then convert to USD, since your account is in USD. In this case the payout for 1 pip of movement is 1.053 dollars for one pip of movement. Remember there are three exchange rates needed to complete the calculation on the EUR/JPY
If your account is funded in another currency you would have to re-calculate the 1 pip payouts on any transaction. Fortunately rather than having to use a calculator every time, all you have to do is place a trade and the math is worked out in your trading platform. So calculations are not needed, just do some demo trades to see how the values change on any pair and look to see how the profit and loss fluctuates.
Swaps and Rollover Interest
Swaps or rollover interest is the amount of interest paid into or debited from your account once per day based on the positions you are holding. Since retail forex trading is leveraged the interest rates must be accounted for. It varies for all 28 pairs and is dependent on the interest rates in the two currencies involved. For example if you buy the AUD/USD and hold on to the trade, you will be paid interest daily because the interest rates in Australia are much higher than in the USA. If you were to sell the AUD/USD pair and hold on to the trade, the interest would be deducted from your account daily. If the interest rate differential is high between the currencies the daily swaps can add up. Also, if the interest rate between the two currencies is similar the daily swaps will be small or negligible. Your broker should be able to provide you with a list of the daily swaps for buys and sells of the forex major pairs and all 28 pairs we trade. The interest paid or debited into your account happens automatically and is programmed into the broker trading platform. So interest rate differential between the two currencies in the pair is a unique characteristic of each currency pair.
Trends and Choppiness
All 28 pairs can trend up and down for days, weeks or months. Similarly, all 28 pairs, including the forex major pairs, can become choppy and difficult to trade, or oscillate in wide, trade-able ranges. As a forex trader we are looking for trending pairs that we can enter a trade with, then ride the trend up and down for long cycles, but we can also do short term trades for intra-day or day trading profits using our tools and indicators. The only thing that matters is the strength and quality of the trends and trading signals you use with our trading system. You should not have any bias towards any pair. Always trade the best opportunity that the market trends and signals present to you of the 28 pairs we have at our disposal every day. If the market is choppy or the signals are weak you can also choose not to trade.