Best pairs to trade binary options

Best Currency Pairs to Trade.

The choice of the best Forex currency pairs to trade is not a walkover, as it might seem at first glance. The main factors to consider when choosing the best currency to trade include volatility, spread, trading strategy and the level of difficulty of forecasting the course.

There is a huge variety of currency pairs available for trading in the Forex market. Most often, ignoring the other instruments, traders open positions on all known EUR/USD and GBP/USD, which are the most traded currency pairs in the world. Apart from them, there is a large number of other popular currencies. So what currency pairs are the best currencies to trade in Forex, what tools are to be excluded from your portfolio?

Let’s start with the fact that depending on the fundamental characteristics, currency pairs are divided into 3 groups:

1. Major currency pairs (Majors) or top traded currency pairs, i. e. pairs that include the U. S. dollar and the currency of one of the most significant and economically developed countries (groups of countries): EUR/USD, USD/JPY, GBP/USD, AUD/USD, NZD/USD, USD/CHF, USD/CAD (together they account for more than 70% of the total turnover of the Forex market). The top currency pairs are characterized with the highest liquidity of transactions, global popularity and a huge number of players.

If pairs were handed an Oscar, then EUR/USD which is most traded currency in the world would have won at least three nominations and would have taken home the award for “highest trading volumes”, “worldwide popularity” and “the lowest spread”. By the way, the prize of spectator sympathies, no doubt, would also have been accrued to it. Euro/dollar (EUR/USD) is the most liquid pair in Forex. It accounts for over one-third of the total volume of transactions on Forex. This is due to various factors, the main of which are the scale and transparency of EU economies and the US.

Trading EUR/USD, the trader receives a range of benefits, which include:

High liquidity of the instrument, which determines the favorable conditions of conclusion of transactions. In addition, due to the liquidity, Euro/dollar pair is one of the most predictable currency pairs of Forex – price dynamics can be predicted using technical analysis indicators.

Predictability of EUR/USD trend. As noted above, the economy of the EU and the US are among the most transparent in the world. Availability of liquid derivatives on EUR/USD. This allows investors to trade on the EUR/USD not only in the spot market, but also to use derivatives such as futures, options, CFDs.

EUR/USD quotes are sensitive to fundamental factors. In particular, Euro/dollar value depends on the monetary policy of the US Federal reserve and the European Central Bank, as well as from the difference in key interest rates by the FRS and the ECB. The overall economic situation in the US and the EU, statements of large corporations, dynamics of raw materials and commodity markets also affect the Euro/dollar pair trading. In addition, analysis of the most popular currency pair EUR/USD is impossible without taking into account geopolitical factors.

The pair of U. S. dollar and Japanese yen (USD/JPY), the top currency of the Asian trading session, acts as a worthy competitor to the previous pair. USD/JPY (dollar/yen) is the second level of liquidity tool in the Forex market. It accounts for about 17% of transactions on the foreign exchange market.

Its benefits include:

Favorable terms and conditions. As noted above, USD/JPY is among the top three most liquid instruments in Forex, what determines low spreads. Ability to predict price dynamics by the means of technical analysis, thanks to its high liquidity. Sensitivity to fundamental factors. The price dynamics of USD/JPY can be predicted by focusing on the important economic data. High volatility. The pair Dollar/Yen is in the top three of the most volatile instruments in the international currency market. A wide range of fluctuations in the share price provides good opportunities for experienced traders. However, new traders need to exercise caution – trading with USD/JPY currency pair is not recommended for beginners because of high volatility. High liquidity of trading in the morning. USD/JPY is the most liquid in the Asian trading session – from 04:00 to 13:00 in Moscow.

GBP/USD (British pound/US dollar) currency pair – is the third level of liquidity Forex instrument. Operations account for about 12% of the total trading volume on the foreign exchange market. The pair pound/dollar is characterized by high volatility and instability of prices. Therefore, it is popular and the most traded currency amongst professional traders focused on short-term aggressive strategies. The pair quotes are sensitive to fundamental factors and statistical data on the state of the British economy and the actions of the Bank of England, as well as to macroeconomic data in the USA.

The pair pound/dollar is a convenient tool for professional traders who prefer aggressive short-term strategy. The pair have high volatility, allowing you to maximize profit on short time periods. In addition, a higher rate of the Bank of England compared to the U. S. Federal reserve allows financial market participants to use the pound sterling as a tool for medium and long – term investments. It is undoubtedly, one of the best currency pairs to trade.

AUD/USD and USD/CAD currency pairs are characterized with much less liquidity. They are held out as commodity currency pairs, as their prices are closely correlated with gold and oil. Australia is a large producer of gold and therefore the price of AUD/USD, as a rule, is highly dependent of gold prices. Similarly, Canada is one of the largest oil producer in the world, and therefore the price of USD/CAD are heavily reliant on oil prices.

2.Cross-currency pairs (Crosses) , i. e. pairs that are formed without the US dollar. From the point of view of trading activity, they are behind. This group includes the following popular currency pairs: AUD/CAD, AUD/CHF , AUD/JPY, AUD/NZD, CAD/JPY, CHF/JPY, EUR/AUD, EUR/CAD, EUR/CHF, EUR/GBP, EUR/JPY, EUR/NZD, GBP/AUD, GBP/CHF, GBP/JPY, NZD/JPY. This list is not exclusive, as there are more traded currency pairs. Of course, not all of these popular cross-currency pairs should be used in trading. For classic trend trading the most preferred and the best currency pairs to trade with the yen, are EUR/JPY, GBP/JPY, AUD/JPY, NZD/JPY. However, as in the case of USD/JPY, the most traded currency pair in the world, it is highly susceptible to various influences, therefore, it is better to exclude them from the trading portfolio of a new trader, who does not possess complex analysis technical forecasting experience.

Exotic pairs (Exotics) , i. e. currency pairs that represent the intersection of currencies of countries less significant in economic terms with the U. S. dollar and between each of them. Here we can name USD/RUB, USD/MXN, EUR/DDK and many others, the volumes of trading of such currency pairs are small. These currency pairs are characterized by low liquidity, high volatility, high spread and risks. Profitability of transactions on these assets is inevitably susceptible to decline because of the exotic currency pairs are poorly amenable to technical analysis, and forecasting of their trend is very difficult. They are no not so many market participants, who trade them, and usually these are the representatives of the countries concerned.

Now, let’s sum up all the above and determine the most predictable and the best Forex currency pairs to trade for beginners and experienced traders. In our opinion, best currency pairs to trade for beginners are EUR/USD, GBP/USD, NZD/USD, AUD/USD; and for experienced traders – EUR/USD, GBP/USD, NZD/USD, AUD/USD, USD/JPY, EUR/JPY, GBP/JPY, AUD/JPY, USD/CHF, XAU/USD.

Beginners are not recommended to trade many currency pairs at the same time. Specialization in one or two instruments gives much better results, and knowledge of successful trading on the major and most traded currencies in the world. You can gradually expand your trading portfolio with new currency instruments. Concentrate on the most simple and quite popular currency pair, and it will bring you profit subject to observance of other Safe trading rules!

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Making Sense of Forex Market Hours.

When you are starting out trading forex pairs, whether it be in the spot market or using binary options, there is a lot of basic information required. Many traders skip over this basic information, and instead seek out strategies immediately. The forex market is open 24-hours a day because banks/businesses are open at different times around the world, providing liquidity to forex pairs. Yet each hour of the day has different tendencies based on what part of the globe is open for business. Understand forex market hours, and hourly tendencies, and you’ll be better able to apply your strategies at opportune times.

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Forex Market Sessions.

Major markets are open at different times throughout the day. Which market(s) is open directly affects the liquidity and volatility and forex pairs.

The EURUSD for example is most liquid and volatile during the London and New York sessions, especially during the “overlap” period when London and New York are both trading.

The USDJPY typically has the most volatility when Tokyo first opens, and when New York opens many hours later.

Currencies generally see increased liquidity when one or more markets that actively trade, or use, that currency are open for business.

Here are the forex sessions based on different time zones:

These charts do not show every market in the world, although these are the major ones. The Canadian market is open while New York is open, and London overlaps with other European markets.

Germany opens one hour before London; therefore, some consider that to be the open, and not the start of the London session. Volatility, on average, doesn’t see a marked increased until London opens though.

Those major sessions directly impact currency pair volatility. The charts below show hourly volatility. If your strategy is based on volatility or you’re using a trending strategy, focus on times of day where the price moves are largest. The “spikes on the chart” are ideal times, as the price needs to be making higher highs or lower lows in order for volatility to increase during that time (see: Trading Efficiently – The 2 to 3 Hour Trader).

If you are using more of a range trading strategy, or prefer low volatility, trade during the sedate times, where the charts show decreased hourly volatility.

All figures below are current as of January 9, 2014. While subject to change, the charts provide a good overall context for relative intra-day volatility.

8 to 17 GMT provide the best trending opportunities, with 13 to 17 generally providing the biggest moves.

Those seeking reduced volatility, or times more likely to quietly range, trade between 20 and 5 GMT.

The USDCHF is very similar to the EURUSD in terms of its hourly volatility structure, although the USDCHF moves less overall each day and therefore overall hourly volatility is several pips less.

The NZDUSD has very similar hourly volatility to the AUDUSD, and they both move roughly the same amount each day.

Currently updated volatility charts and other forex statistics are available at Daily Forex Stats.

Learning the basics, such as what the market sessions and hours mean to you as a trader, can significantly help in determining what strategies to exercise and when. No matter what time frame you trade on, you should have a checklist which helps you determine what type of market environment you are trading in. This will also help with filtering trades and capitalizing on good opportunities.

The Best Times to Trade Binary Options.

Lesson 1: The Best Times to Trade Binary Options.

Welcome to our new series on binary options trading for beginners, where we will take you by the hand and show you a systematic way to trade binary options. Today we will touch on the best times to trade binary options.

Binary options’ trading involves trading several assets and making money based on the outcome of the price direction. Some of these assets are traded on a 24-hour basis: here we have currencies, commodities and stock indices. Stocks are not usually traded on a 24-hour basis. The trading hours of a stock market determine the times at which a stock listed in that market is traded. When you take the time zones of the trading capitals of the world into consideration, this gives different trading hours for trading stocks on the binary options market.

The binary options market is one where traders make money based on predicting direction, and volatility is what gives price action direction in the market.

Trading works best when the market is bubbling with activity from traders all over the world. When there is good trader activity in the market, it generates the liquidity and volatility needed for the underlying asset to get to its target before the option expires.

Even though assets like currencies and commodities are supposed to be 24-hour markets, there are only certain times of the day when the market activity is at its maximum. This is usually when we have an overlap of the trading zones of the world.

Because not all assets have the same trading hours, we will discuss the various classes of assets as separate entities, taking into account their own peculiar trading hours.

As we mentioned earlier, stocks are usually traded for a maximum of 6 to 8 hours a day. Stocks of most major companies outside the US are traded on the US stock markets as American Depository Receipts (ADR). As such, the US markets are used as the benchmark of checking the trading hours for stocks. US stock markets usually trade from 9.30am EST to 4pm EST.

However, there are other markets in Europe that are just as important, such FTSE (7am GMT to 3.30om GMT) and the Xetra Dax (8am GMT to 4.30pm GMT) in Germany. If you are trading stocks in the binary options market, pay attention to the times at which the stock markets in which they are listed are in operation.

The forex market is most active when there is an overlap of the London/Asian and London/New York time zones. The diagram below gives a perfect illustration of this.

You also need to know that the local currencies of the active time zones will have increased volatility over others. For instance, the Australian Dollar will be more active during the Asian/London time zone overlap than the London/New York time zone overlap.

Commodity markets are most active at the following times:

Crude oil (NYMEX. CL) – 9am EST to 2.30pm EST.

Natural gas – 9.30am EST to 5.15pm EST.

Corn – 9.30am EST to 1.15pm EST.

Gold – 8.20am EST to 5.15pm EST.

Silver – 8.25am EST to 5.15pm EST.

Another way of studying the trading times would be to group the commodities under the exchanges where they are traded. As such, the agricultural commodities, which are traded in the Chicago Mercantile Exchange, are more actively traded from 9.30am EST to 1.15pm EST and from 6pm EST to 7.15am EST the next day.

Full information on trading hours is available on the CME Group website.

Timing for Index Futures.

Stock indices are CFD instruments that measure the movement of the relevant exchanges, As such, the DJ30, NASDAQ100 and S&P500 will conform to the US markets open from 9.30 am EST to 4.30pm EST, and the DAX30 will conform to that of the Xetra Dax’s trading hours.

Once you master the trading hours for each asset, you are one step away from potential profitability in the market.

The best currency pairs to trade.

As most binary options traders know, binary options trading can use currencies as an underlying asset choice. The trading of currencies in the binary options market is a lot easier than trading directly on the Forex market. The opportunity to trade currency via the binary options market offers traders several benefits, such as:

Access to the largest financial market in the world Sufficient liquidity Trading of various currencies around the clock Knowledge of exact income on in-the-money trades Simple risk management One very interesting concept is to melt forex with binary options trading – meaning that you can take advantage of both trading techniques and fully exploit the market potentials. One broker that does a very good job in this regard is IQOption. Their trading platform is superior to anybody elses. You can drop up to 9 charts of currency pairs on one screen and work with different indicators for each. It’s best to take a look for yourself. If binary options is interesting to you you have to check out this broker.

RISK WARNING: YOUR CAPITAL MIGHT BE AT RISK.

This raises the question then of what is the best currency pair to trade. This is not so easy to answer, because each currency pair has its own personality, and every trader also has his or her own personality.

Essentially, deciding upon the best currency pair to trade is simply a matter of finding your own personal advantage in the market. Moreover, it of course also depends on what time of day a trader prefers to trade . For example, those who wish to trade in Asian currency should choose Yen currency pairs, even though the GBP/USD is a more popular currency pair to trade .

Here are some additional currency pair trading tips.

The EUR/USD currency pair has the highest order flow and thus the best liquidity in the entire forex market. You need not be afraid of possible slippage (with few exceptions), and your trades will always be executed immediately.

Also, trading of EUR/USD currency pairs will typically have a lower amount of volatility. Therefore, this currency pair is particularly suitable for beginners. Another advantage is the very low spread, especially if you are considered to be a scalping trader.

USD/JPY & USD/CHF.

With USDJPY and USD/CHF currency pairs, traders may also have an advantage. These currency pairs have a very strong order flow, however, these currency pairs sometimes have too little “action.”

AUD/USD& USD/CAD.

In the AUD/USD and USD/CAD currency pairs, the liquidity is a lot less. Therefore, their movements are sometimes very surprising and there are often unexpected reversals.

The AUD/USD and USD/CAD are often referred to as commodity currency pairs, as their prices correlate strongly with gold and oil. Australia is a large producer of gold and therefore the price of AUD/USD is typically influenced by the price of gold. Likewise, Canada is one of the largest oil producers worldwide, and therefore the price of the USDCAD often depends closely with the price of oil.

The GBPJPY is very volatile and therefore suitable only for more experienced binary options traders. This volatility is especially present when Japan publishes new economic data, causing drastic movements in the currency values.

The GBP/USD is also a very solid currency pair for beginners to the binary options trading arena. Here you will find very good liquidity and very good movements. The GBP/USD is slightly more volatile than the EUR/USD, but not as volatile as trading the GBP/JPY currency pair.

Conclusion.

It is suggested that beginners to the binary options trading market should initially focus first on the EUR/USD and the GBP/USD currency pairs. In order to ultimately find the best currency pair for yourself, it helps to test, test, test. In doing so, traders should initially put very small sums into these trades, and then document all trades in a trading journal. If you see that your strategy works in the relevant currency pair (you’d need about 100 trades so that the statistical significance is also relevant), then you can scale up and increase your investments.

Another final tip: If you’re really interested in trading the Forex through binary options and you want to know the background and strategies in more detail, we recommend the book “ Order Flow Trading for Fun and Profit“.

IQ Option is one of the most reliable and secure brokers and a safe haven for all traders. This broker is regulated by CySEC and offers options for as low as $1, plenty of stock options and a great trading platform!