In the Forex market and binary options, currency pairs are considered the most popular trading assets. Thanks to this, new opportunities for earning money open up for novice traders. The fact is that over many years of trading, experienced investors have identified a list of the best pairs for binary options, transactions with which bring both stable and high profits.
Next, we’ll look at the best currency pairs for binary options and which currencies beginners should pay attention to.
Binary options: currency pairs
Currency pairs refer to the monetary units of individual countries. A trader, purchasing one such unit, simultaneously puts up a second one for sale (automatically).
Many market experts advise novice traders to work specifically with currency pairs on binary options, since the movement of a given asset is easier to predict both when trading with a trend and when trading in a flat . This feature is clearly manifested in comparison with trading of stock indices, shares, cryptocurrencies and other popular assets. Also, the popularity of currency trading in binary options is facilitated by the high volatility of such assets, which can be worked with throughout the day ( Forex is open around the clock). You can learn more about the pairs on the live binary options chart .
Decoding currency pairs in binary options
Simply put, a currency pair in binary options is understood as an expression of the value of one monetary unit in relation to another. This asset appeared on the Forex market for the first time. To understand the peculiarities of this trading instrument, you can consider the most popular pair EUR/USD, which shows how many dollars can currently be purchased for one euro. Traders call the first currency in such pairs the base one (that is, the one that the exchange participant buys), the second - the quoted currency (that is, the one for which the base currency is bought).
Types of currency pairs in binary options
Before starting to trade binary options and currencies, a novice trader should understand the classification of such assets accepted in the market. Most binary options brokers and Forex brokers offer their clients a choice of three popular groups. However, the list of assets in such groups may vary significantly.
Major currency pairs (main)
Major currency pairs in binary options include the most popular currencies among traders, which account for up to 80% of transactions from the total volume of transactions performed.
The popularity of such trading instruments is due to their high liquidity. That is, the demand for these pairs, regardless of the nature of the current market behavior and other conditions, remains always high. In this regard, most of the binary options trading strategies used by traders are designed specifically for these currency pairs.
Minor currency pairs (cross rates)
Minor currency pairs in binary options contain assets whose price is determined through the value of the third. That is, there is no dollar in this trading instrument. A number of experienced players insist that the pairs for beginners in binary options are precisely minor pairs, since this trading instrument is easier to work with.
Exotic currency pairs
These trading instruments do not have the liquidity that is typical for major currency pairs. Therefore, it is more difficult for traders who work with such assets to make a forecast of exchange rate movements. However, with sufficiently effective trading tactics, exotic currencies can generate high profits.
Binary options: which currency pairs are the most popular?
Due to the fact that there are many countries in the world, each of which has its own currency, binary options traders use only highly liquid currency pairs to simplify trading, which include the following:
- EUR/USD . The most popular asset in the foreign exchange market, demonstrating maximum liquidity regardless of the situation in the world. According to calculations, about 30% of all transactions fall on this particular pair. But this feature makes trading difficult, since this asset is sometimes characterized by high volatility. Therefore, when working with EUR/USD, traders mainly use strategies related to trend movement. This approach is considered the most profitable when performing transactions with currency pairs in binary options.
- USD/JPY This pair in binary options is second only to the first in popularity. However, when starting to trade this asset, you need to take into account several important nuances. This currency, according to traders, is considered one of the most dangerous due to the fact that its exchange rate can change sharply, which can bring both significant profits and significant losses. Therefore, it is recommended that novice players avoid this asset at first. But as traders gain experience, they should take a closer look at USD/JPY, since this currency pair, with a quality strategy, can bring high income.
- GBP/USD . The second popular currency pair used by traders who prefer aggressive binary options trading. The reason for this is the powerful reaction of the pound sterling to news from the economic calendar , which directly relate to the financial and political side of life in Great Britain. According to traders, the optimal type of GBP/USD trading is considered to be operations with turbo options with an expiration time of 30 or 60 seconds. Correct analysis of news related to these factors allows you to predict the direction of exchange rate changes and, as a result, make high profits.
- USD/CHF . This currency pair, according to traders, is not suitable for trading using a strategy that is based on technical analysis methods. In most cases, the USD/CHF and EUR/USD rates move in opposite directions. However, another situation often arises in the market when both pairs rise or fall at the same time. Moreover, in such cases there are often no sharp jumps in rates, and their direction does not change over a long period of time.
- AUD/USD This currency pair in binary options is characterized by average exchange rate volatility, making this asset easy to predict. But only about 6% of traders use AUD/USD in trading. AUD/USD is the best currency pair for beginners in binary options and it is also considered one of the most optimal pairs, as it allows you to test the effectiveness of selected trend strategies in practice.
- NZD/USD By the nature of exchange rate changes, this pair resembles AUD/USD. In both cases, there is a good trend movement and average volatility. Despite the fact that this asset has only begun to gain popularity in the last few years, the NZD/USD pair remains one of the most attractive for novice traders. On average, operations with this trading instrument account for about 6% of the total volume of transactions.
- USD/CAD This pair in binary options is also not very popular among traders: only 5% of market participants choose this trading instrument. However, the USD/CAD exchange rate directly depends on current oil prices. Moreover, in this case, there is an inverse correlation: when the price of “black gold” falls, the specified pair begins to rise, and vice versa. In this regard, when trading USD/CAD, it is necessary to take into account the behavior of the oil market and apply fundamental analysis methods.
- EUR/JPY One of the most difficult assets among popular trading instruments, since the direction of movement of the rate of this pair is difficult to predict. EUR/JPY becomes most popular during periods of economic crises. The rest of the time, only 3% of traders trade this pair. EUR/JPY is a rather difficult currency pair for binary options beginners.
- EUR/GBP Recently, experienced traders do not recommend beginners to trade this pair, since the pound sterling exchange rate is subject to significant and unpredictable fluctuations. The latter is largely due to the fact that Britain’s exit from the EU interferes with long-term analysis of the economic development of this country. Therefore, today only 3% of traders work with the EUR/GBP pair.
You can also see general statistics of the most traded currency pairs in the world:
Despite the popularity of the above pairs for binary options, it is impossible to apply a single trading strategy in relation to these assets. At the initial stage, traders are advised to take only one instrument, without paying attention to others. This approach will allow you to understand the nature of the behavior of assets in the foreign exchange market and select optimal behavior strategies that are suitable for a particular pair. Also, thanks to this, you can more accurately adjust the indicators so that they give effective signals.
Which currency pair should a beginner choose in binary options?
This question is considered the most relevant for traders who are just starting to trade currency pairs in binary options. More often, novice players work with popular assets such as AUD/USD or NZD/USD, whose rates are easier to predict. However, less common trading instruments like USD/CAD, which are usually not subject to noticeable fluctuations, can also bring profit. In this regard, it is impossible to accurately answer the above question, since this requires a deeper understanding of the task at hand.
The choice of a currency pair in binary options for beginners is mainly determined by the individual preferences of a particular trader. Moreover, quite often the final decision on which asset is best to trade is made by a market participant over time, as he gains experience. The dynamics of changes in the exchange rate of each currency usually intensify at strictly defined time intervals. More precisely, such movements are observed during the period when the central bank of the country in which the chosen monetary unit is national operates. For example, pairs with USD are recommended for trading when the American trading session of the market opens, with JPY - Asian, and so on.
It is not advisable to engage in trading with one currency when the rate of the second of the selected pair is currently fluctuating sharply. Trading during the period when the session is closed will also become unprofitable. For example, you should not open positions on the EUR/USD pair during the Asian session, since during this period the movement of the rate of this asset becomes unpredictable, as a result of which indicators often give false signals.
When choosing a suitable trading instrument, it is recommended to take volatility into account. This refers to the intensity (speed) of changes in the exchange rate up or down. The pairs USD/JPY, EUR/USD and USD/CHF are characterized by relatively low volatility, provided that there is no influence of fundamental factors (the weakening of the global economy, decisions of the Central Bank of a particular country, and so on).
Trading binary options based on pairs of euros with Canadian or Australian dollars is considered more risky, since the rate of these assets will change sharply and quite significantly. At the same time, if traders plan to engage in high-risk transactions, which, with the right strategy, can actually bring significant profits, it is recommended to open transactions with GPB/USD.
Experienced market participants noted that the rates of individual currency pairs correlate with each other. That is, the value of one asset usually rises or falls at the same time as the price of another rises or falls. However, in practice this pattern is not always observed. Therefore, you cannot constantly buy an option on one of the related assets in the same direction (or the opposite, if an inverse correlation is identified) when the price of the second begins to change. To monitor currency correlation more effectively, you can use correlation indicators for binary options .
You should also not choose only one currency to work in binary options, since market participants have access to several trading instruments, each of which can be used simultaneously to make a profit. It is especially important for novice traders to experiment with different assets. This is explained by the fact that one pair at a certain moment, when using a specific trading strategy, may turn out to be unprofitable or difficult to predict, while the second one may bring profit.
Best time to trade currencies in binary options
One of the important components that determine the amount of profit received when working with binary options is the time interval. That is, the exact period during which transactions must be concluded. It is the right timing that largely determines the amount of income received from trading.
It should be noted that not only this factor affects the profitability of trading. Concomitant events play a significant role, on which the direction of the trend and exchange rate fluctuations depend. It is especially important in this regard to take into account factors affecting the underlying assets in the currency pair.
However, a correctly selected time interval helps both to neutralize the nature of the impact of these events and to extract additional profit when such situations arise. Moreover, a trading strategy that takes into account only the exchange rate and volatility of a currency pair will not bring significant income in the long term. Price fluctuation charts are always arranged in strict chronological order and show how the value of the selected asset fluctuates over one minute, hour, week and other period of time.
In this regard, the success of trading currency pairs in binary options directly depends on the period of transactions. Therefore, experienced traders always keep in front of them the schedule of opening and closing of exchange platforms in different countries ( trading session times ). The fact is that each market has a certain impact on the market. It was noted above that the USD/CAD exchange rate depends on current oil prices. Similarly, the value of currencies is influenced by other factors, which often become known after the opening of the relevant sites.
When working in financial markets, you should also take into account the time zone in which the trader lives, as well as the change in time when switching to summer or winter.
It has been noticed that rates fluctuate sharply at the moment the site opens, since traders, after starting trading, become more actively involved in the process, conducting the maximum number of transactions per day. Because of this, there are noticeable changes in the prices of various assets. Despite the fact that this time period can bring significant profits, trading after the opening of the session is not recommended, since at this moment a sharp change in the direction of the trend is possible, which will lead to significant financial losses.
The second dangerous period for opening a transaction is considered to be the time period shortly before the closing of the exchange. At this point, many day traders exit their operations, causing price fluctuations. Therefore, opening trades shortly before the session closes is also not recommended.
Regardless of the chosen pair in binary options and other factors, Tuesday, Wednesday and Thursday are considered optimal for trading, when traders’ activity gradually normalizes. These days, many experts use technical analysis methods that take into account trend behavior. This approach allows you to make a more accurate forecast of price movements, identify stable directions and increase the profitability of operations.
Unpredictable fluctuations are observed during the release of significant news. Therefore, at this moment it is impossible to open trades, provided that the trader does not use fundamental analysis methods when predicting the rate. Experts adhere to similar recommendations when trading on holidays, when prices in the foreign exchange market can change sharply for unpredictable reasons. During such a period, you should refuse to trade, despite the fact that there are many brokers on the market that allow you to open transactions with binary options on weekends ( OTC quotes ).
Prices of currency pairs in binary options
The nature of price changes and volatility of an individual currency pair depends on the influence of several factors:
- Political decisions . These may be country-specific, regional or international events that can change traders' expectations of both a specific currency and the market as a whole. For example, the rise of a certain political force to power can weaken or strengthen the monetary unit. Moreover, some of the events occurring within the country can have an impact on border states. Let’s say that the EU’s decision to sharply reduce the volume of oil purchased from Russia will have a negative impact on the ruble exchange rate.
- Market Psychology . This refers to investors’ perception of individual events, on the basis of which they take certain actions that may affect the exchange rate. For example, the publication of news about a decrease in gross national income, an increase in unemployment, an increase in the deficit and other similar events can, in the short term, reduce the value of a particular country's currency. But investors constantly analyze past exchange rate fluctuations to make forecasts for the near future. These expectations can also cause the price to go up or down.
- Waiting for an event . This can also be attributed to the concept of market psychology. Investors react in a certain way to news that allows them to make predictions about specific events that may occur in the future. If expectations were subsequently not met or, on the contrary, the situation turned out to be more serious, then in such situations a sharp jump in the exchange rate is observed.
During periods of economic crisis or political tension, traders usually buy those currencies whose rates, in the opinion of market participants, will not fluctuate noticeably. In such circumstances, prices for currencies of countries that have traditionally been islands of stability (for example, the Swiss franc) often rise. This, in turn, leads to an increase in the exchange rate of this currency.
Forecasting prices of currency pairs in binary options
To date, many relatively effective methods have been created that make it possible to accurately predict changes in exchange rates in the short, medium and long term. But regardless of the chosen analysis ( candlestick , technical, graphic , wave, etc.) or binary options trading method , you need to take into account several important nuances:
First, when analyzing charts, you need to move from large time intervals ( binary options time frames ) to small ones (from D1 to M15). For example, when choosing a four-hour time frame, a trader sees that the price chart has broken through a local resistance level. This situation signals the need to open a transaction to buy an asset. However, if we look at the weekly chart, it becomes clear that the rate is currently near the support line and regularly breaks it down. Those traders who do not take such situations into account often lose money.
Secondly, backup options for behavior are needed. No trader, regardless of his level of preparedness, is capable of making an accurate forecast on the foreign exchange market, which with 100% probability will bring profit. Therefore, when making transactions with currency pairs and binary options, you need to be ready at any time to apply one or more different trading strategies. With this approach, if the chosen scenario does not bring results, you can immediately use another one, which may turn out to be more effective or keep losses at an acceptable level.
And third, analyze previously made mistakes. If the current strategy begins to bring losses that exceed the profits received, trading should be suspended and find out what led to this situation. In this case , money management and risk management can help.
Conclusion
The information above shows that the success of trading binary options on currency pairs depends on the correct choice of asset and the time to open a transaction. The last factor often plays a decisive role, since it increases the predictability of the operation. When working in the foreign exchange market, a trader must have constant access to the schedule of trading sessions and news channels. Without meeting these requirements, binary options will cause losses in the long run, regardless of how correct the strategy used turns out to be.
See also:
Psychology in trading - what does a beginner need to know?
How to choose a binary options broker?
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