Choosing the right currency pair for scalping
There are many traders who use the following methods in their trading scalping. Scalping can be used as the main technique of making profits, or it can be used as an auxiliary technique for entering a medium-term position with a reduced StopLoss size.
However, scalping shows different efficiency when used on different trading instruments. The volatility of a currency pair will directly influence trading risks, the amount of profit and loss. Before applying scalping methods, it is wise to study the characteristics of the currency pair, identify all its advantages and disadvantages which will be useful not only for scalpers.
Why is the choice of currency pairs important?
Naturally, the choice of currency pairs is a separate and quite voluminous topic, because each currency has its own "nature" and its own set of factors that shape its dynamics. The choice of a trading instrument is important not only for scalping, but in scalping, where there is literally a struggle for every pip of profit and a sharp change in the rate can lead to a loss, it comes to the forefront.
Scalping on EUR/USD, GBP/USD
The euro/dollar and pound/dollar currency pairs are the most popular among traders. This is due to the high liquidity of these currencies and low spreads. The euro, the pound sterling, and the dollar are among the world's most common and strongest currenciesThe choice of these currency pairs, especially for novice scalpers, is obvious. The choice of these currency pairs, especially for scalpers-beginners is obvious. The so-called market noise of EUR/USD and GBP/USD is 20-30 pips on average, which allows earning quite a good profit even with weak movements.
Trade on these currency pairs will be especially effective for scalpers who use the analysis of volumes in trade, because it is on these highly liquid pairs are clearly visible actions of major market players.
Scalping on USD/CAD, AUD/USD
By and large, to put the currency pairs USD / CAD and AUD / USD in a row would not be quite correct, because USD / CAD is more suitable for flat strategies, and AUD/USD has a pronounced trend character. However, we mention them together, due to the fact that these currency pairs are characterized by small counter-trend fluctuations in the quotes. The market noise for the pairs USD/CAD and AUD/Dollar is on the average 20-40 pips.
Scalping on the currency pair USD/CAD is recommended in the evening or at night. In this regard, the currency pair USD/CAD is often a trading tool for experts - night scalpers, because scalping advisors assume low volatility on the market, allowing to avoid fears of powerful directional changes in quotations.
For the AUD/USD currency pair the situation looks somewhat different. The Aussie allows you to make a profit of 100 to 300 pips per trade on a good trend movement. Nevertheless, the Aussie/Dollar currency pair is interesting because it is not affected by important economic news at night.
Scalping on currency pairs with the Japanese yen
The Japanese yen is another currency that is widely used in the market. The most popular pairs for trading are USD/JPY, EUR/JPY, GBP/JPY.
There is one very important point here. With the exception of the dollar/yen currency pair, all other pairs are cross-coursesThe scalper can make several times as many trades and increase profits. Due to high volatility, a scalper can make several times more trades, which increases profitability.
It is also worth noting that Cross rates are characterized by the presence of the strongest market noise - on average 50-80 points. As a consequence, the size of stop-losses increases, which can reduce the profitability. If we follow the money management rules, the profitability of cross rates scalping is approximately equal to the profitability of EUR/USD and GBP/USD scalping. That is why cross rates with Japanese yen can be considered as additional currency pairs or as an alternative for scalping on the major currency pairs.
A competent choice of currency pairs for any method of currency trading is one of the conditions for profitable trading. The above characteristics of currency pairs are relatively superficial because an enthusiastic trader may tell for hours about each currency and currency pair. Of course, the most objective characteristic of a currency pair can only be given by a trader who has been using it in trading for a long time, because the theoretical part of currency characteristics should of course be supplemented by practical characteristics.