Choosing the best currency pairs for scalping in forex trading

This article is the continuation of series of our guide on usage of scalping techniques for forex trading. We recommend you to complete previous readings before continuing this article.

Scalping involves high levels of dedication and suitable fundamental and technical setups to achieve the full profitable results. In our previous article we saw some of the necessary things to check of broker and now in the following line, you will see the best currency pairs for scalping strategies.

Generally, scalping is suited for currency pairs which are not easily affected by sudden market movements or these movements occur less frequently. The best currency pairs to perform scalping are discussed in following lines. Among them, EURUSD currency pair is least volatile and most liquid.

Majors

The major group includes currency pairs like EURUSD, USDCHF GBPUSD and several others. These are the most dominant and influential economic world powers. Although we can also include JPY currency pair in this list too however, they show slightly different behavior so it will be discussed in Carry group of currency pairs.

The one key property is liquidity amongst this group. Another property is that they are less affected by sharp changes in market. For example, a market shock which can cause a movement of up to 100 pips for AUDJPY pair will usually cause just 30 pips movement in EURUSD pair. These major currencies are traded in banks all over the world as they are reserve currencies. They are the big market leaders in currency pairs with huge trade volume and usually move very slowly.

Scalpers who are interested in trade ranges or exploiting the slow markets and small movements of currency pairs for small profits can trade in these major currencies using their strategies.

Carry Pairs

Carry Pairs have high liquidity and they are volatile too. These include currency pairs like USDJPY and EURJPY which are traded worldwide. Their trading activities are hectic but they are volatile because of highly risky invest and borrow activities in Japanese currency (JPY). Because of this, whenever there is a sharp change in market these pairs react in a very unpredictable way and makes it impossible for trader to manipulate his trading decisions and more especially for scalpers as they have to take decision in short time periods.

This group of currency pairs is mostly traded for the purpose of interest income. Even though these pairs can be used for scalping but are not advisable because at some time market changes can cause great loss to trader and not even his stop-loss order will help. It is common that spreads widen in carry pairs but opposite to EURUSD pair, carry pairs will have this more frequently, for longer time and deeper.

It is not advisable for beginners to start scalping using carry pairs. Even the experiences scalpers will need good knowledge and skills of trend-following strategies to get good profits from sharp market movements.

Exotic Currencies

Exotic is a common term used in options market but here we will use this term for lesser popular and lesser liquid currency pairs which should not be used for scalping. This group has currency pairs which are volatile including Russian ruble, BLRUSD (BRL=Brazilian Real) and NOKUSD (NOK=Norwegian Krone) and several others which are lesser known amongst traders.

Scalping should not be performed for this group of pairs as there are frequent price gaps and difficult money management strategies if you want to earn in short term time. Beginners should especially avoid these pairs in order to avoid big losses for scalpers.