- Which FX Currency is the Best to Trade?
- Characteristics of Major Forex Currencies
- Which Forex currency is the best for beginners?
- What affects currency price movements?
- What is MT4 (MetaTrader4)?
- What are the benefits of MT4?
- What are the disadvantages of MT4?
- Tips of using MT4 trading platform
- Automated System Trading on MT4
Which FX Currency is the Best to Trade?
There are about 20 types of currencies that can be traded in the Forex market, but since the characteristics differ depending on the currency, it is easy to lose track of which currency pair to trade.
If you trade without knowing the characteristics of the currency pair, you will not be able to cope with sudden price movements and you may lose a large number of assets.
In this article, we will introduce the characteristics of currencies, recommended currency pairs, rankings by characteristics, and so on.
We will also introduce the factors that affect the foreign exchange market, so you can understand the factors that cause price movements.
For those who want to trade the currency that suits them, or for Forex beginners who are uncertain about choosing a currency, continue reading the article below.
Characteristics of Major Forex Currencies
Each currency that can be traded with Forex has its own characteristics, and the difficulty of trading varies depending on how the currency pair is combined.
Therefore, it is important for Forex beginners to understand the characteristics of each currency in order to have criteria for choosing a currency pair.
If you know the characteristics of currency:
- You can choose a currency pair that suits your trading style.
- You can choose the appropriate currency pair that suits your lifestyle.
- It is possible to judge in advance whether the currency pair is easy to obtain the information necessary for predicting price movements.
Here, we will introduce 10 types of popular and high-volume currencies called major currencies.
If you are new to Forex, it is a good idea to first determine the currency pair you want to trade from the currencies around here.
- US Dollar (USD)
- The world’s key currency with the highest trading volume, and has stable value.
- Euro (EUR)
- Euro has the world’s second largest trading volume and volatile price movement. Suited for those who want to make a profit in short-term transactions.
- Japanese Yen (JPY)
- Japanese Yen the world’s third largest trading volume and is a currency with stable value.
- British Pound (GBP)
- British Pound’s price movements are intense. British Pound ha relatively small transaction volume among major currencies, and suited for intermediate and above.
- Canadian dollar (CAD)
- The Canadian dollar is similar in nature to the Australian dollar, but the swap point is not high. The Canadian dollar is a currency that is easy to handle with small price movements.
- Australian dollar (AUD)
- Australian dollar has high interest rates as one of the major resource-country currencies. Australian dollar is a popular currency for individual investors aiming for swap points.
- New Zealand dollar (NZD)
- New Zealand dollar is the same as Australian dollar, a resource country currency. You should be careful as it may skyrocket when there are few market participants.
- Swiss franc (CHF)
- Swiss franc is a stable and valuable currency. There are many carry trades due to low interest rates.
1. US Dollar (USD)
The most important currency in Forex is the currency circulated in the United States, known as the US dollar.
It is the world’s key currency and has the largest trading volume, so it has a stable value.
In addition, it is a currency that is easy for Forex beginners to trade because it is easy to get information anywhere despite being an overseas currency.
When the US dollar is included in the currency pair, it tends to be a straightforward price movement.
In an emergency, there is a tendency to buy dollars, and in developing countries, the US dollar is more trusted than its own currency.
2. Euro (EUR)
It is the currency used by the Economic and Monetary Union, the European Union of Europe.
Due to the volatile price movements, it is popular with those who want to make a profit in short-term transactions.
It tends to show particularly large price movements, such as when the movement of one country has a large impact on the entire euro area.
Keep in mind that it is a common currency used in many countries and is affected by many economic conditions.
Although it is a new currency launched in 2002, it boasts the second largest circulation volume in the world after the US dollar.
3. British Pound (GBP)
It is a currency mainly used in the United Kingdom.
It is said to be a currency for intermediate and above among Forex traders because it is more difficult to handle than major currencies and it is difficult to move according to the manual.
The trading volume is small among the major currencies.
Since it is often bought and sold for speculative purposes, it has the characteristic that price movements tend to be intense.
It is recommended that you try trading in pounds after getting used to Forex.
4. Australian Dollar (AUD)
The Australian dollar has high swap points and is known to be a high-interest-rate currency.
It is a popular currency for individual investors aiming for swap points with long-term buying positions.
Since price movements are intense, you need to be careful about the entry timing when you have a buy position aiming for swap points.
AUD is a resource-rich currency, and it is highly linked to the prices of iron ore, coal, and copper, and is popular with the New Zealand dollar and Canadian dollar.
The volume of transactions is not that high compared to other major currencies.
It is a currency that is also influenced by the Chinese economy because it has a close relationship with China in its economic activities.
If you want to operate Australian dollars, you also need to check the information of China.
5. New Zealand Dollar (NZD)
It is the same resource country currency like the Australian dollar.
Prices often change due to the price movements of the Australian dollar.
In New Zealand, economic indicators are released during times of low market participation.
Forex beginners need to be careful, as only the NZ dollar may skyrocket depending on the content.
Compared to the currencies of other resource-rich countries, it is a currency that is highly linked to dairy product prices.
7. Japanese Yen (JPY)
The yen is a currency used only in Japan.
It has the third-largest trading volume in the world after the US dollar and the euro and is said to be one of the three major currencies in the world.
It is a currency that is easy for beginners to handle because traders can quickly catch and respond to information on major natural disasters and incidents that affect the value of the Japanese yen.
The characteristic of the yen is that it is easily affected by overseas economic indicators.
For example, when US interest rates, statistics, monetary policy are announced, or when the Chinese government announces some data, the yen is affected dynamically.
In addition, if you find something uneasy in another country, you may have to buy yen for the time being.
It also has a characteristic that the interest rate is low.
8. Swiss franc (CHF)
The Swiss franc, a permanently neutral country, has a stable value.
From the aspect of stability, there is also a tendency for buying to occur in the event of an emergency.
As a low-interest-rate currency, it is often used for carry trades.
9. Canadian Dollar (CAD)
Canada is a developed country and also a resource-rich country.
It has similar properties to Australia but is a straightforward and easy-to-use currency.
The reason why it is easy to handle is that the swap point is not as high as the Australian dollar, the price movement is not so big, and it is a currency with a relatively straightforward character.
In addition, price movements are seasonal and highly correlated with crude oil prices.
Which Forex currency is the best for beginners?
Now that you have a grasp of the characteristics of major currencies, we will introduce how to select a recommended currency pair for Forex beginners.
To choose a currency pair that suits your investment style, you should know the characteristics of the currency, and take the following points.
- Choose a currency pair with a large amount of circulation and small price fluctuations.
- To save money by interest rate difference, choose a currency pair with a high swap point.
- For short-term transactions, keep transaction costs down with currency pairs with narrow spreads.
1. High circulation and low price fluctuations
Currency pairs with high circulation tend to have relatively stable price movements.
For example, in the case of a currency with a small amount of circulation, since there are few market participants in the first place, the market price can be affected by small volume transactions.
This is the state where the balance between supply and demand is lost.
A currency with a large amount of circulation means that there are so many market participants, so it is less likely that the balance between demand (people who want to buy currency) and supply (people who want to sell currency) will be stable.
If you want to make stable transactions, choose a currency pair with a large amount of circulation.
2. A high swap point to earn steadily due to the interest rate difference
For Forex beginners, it is recommended to choose a stable currency pair with a high swap point.
Swap points are automatically accumulated just by holding the currency, so even beginners who can not read price movements can steadily accumulate profits every day.
South African rands and Turkish lira, which are said to be high-interest rate currencies, are popular currencies for swap management, but they are not recommended for beginners due to large price fluctuations.
For example, in August 2018, many people suffered at the forced stop out caused by the collapse of the Turkish lira.
Forex beginners who are thinking about swap management should pay attention not only to the swap points but also to the stability of the currency.
3. Keep transaction costs down with currency pairs with narrow spreads
There are “commission” and “spread” in the cost of each transaction.
There are many Forex companies that charge virtually no fees, so pay attention to the narrow spread as the cost per transaction.
When you are just starting Forex, some people find it difficult to even make a profit due to large transaction costs.
Also, the more transactions you make, the more transaction costs you pay.
Choose a currency pair with as narrow a spread as possible so that you don’t get negative as a result of subtracting transaction costs from your profits.
What affects currency price movements?
We have introduced the characteristics of currencies and recommended currency pairs, but when choosing a currency pair, you should also check whether it is easy to obtain information related to price movements.
Do you know the things that affect the price movement of currencies?
Information that affects the foreign exchange market includes the following:
- Fiscal and economic policies of each country.
- US Employment Statistics.
- Central bank policy and long-term interest rates.
- Rating agency’s assessment.
- Correlation with other investment products.
If you can get this information quickly, you can respond quickly to fluctuations in the market.
You can also take action before major price movements occur, reducing the risk of losing money.
Currently, you can check the information online or in newspapers, but be aware that the quantity, quality, and speed of information vary from country to country.
1. Fiscal and monetary policies of each country
In Forex, the monetary and economic policies of each country cannot be ignored.
You need to know that it creates a big flow of market trend.
What the country’s expenditures and revenues are like, and what kind of economic policy to take, are very important points.
For example, in Japan, “Abenomics” conducted by the Abe administration after the 2012 election.
Abenomics is an economic policy that changed Japan, which had been suffering from the strong yen because it did not carry out quantitative easing after the Lehman shock.
On Monday, immediately after the election of the House of Representatives in December 2012, the yen depreciated as early as possible, and as a result, the yen depreciated by 18% over the year.
As you can see from Abenomics, monetary and economic policies have a long-term impact on exchange rates.
2. US Employment Statistics
Employment statistics in the United States get a lot of attention every month because the results have a big impact on the exchange rate.
Before the release of employment statistics, the market will be in a wait-and-see mood for the announcement, and it is not uncommon for the rate of currency pairs involving the dollar to skyrocket or plummet immediately after the release.
The reason why it receives so much attention is the Lehman shock.
After the Lehman shock, the Fed started to look carefully at employment conditions when it cuts interest rates, and as a result, employment statistics came to the fore.
Even now, the Fed has decided on monetary policy such as rate hikes, taking into account the results of employment statistics.
As a result, employment statistics have become a hot indicator and are being used as a predictor of the Fed’s monetary policy.
The indicators that the market pays the most attention to will change as the themes that the market pays the most attention to change.
It is unclear whether employment statistics will continue to be the most influential indicator of the market as it is now.
However, employment statistics are now the most influential indicator of the foreign exchange market.
Regardless of which currency pair you are trading, it is a theme that the market is paying attention to, so you need to keep an eye on it.
3. Central bank policy
Central bank policies have a significant impact on foreign exchange rates.
Central banks in each country set inflation targets, and control prices so that they fall within the inflation target range.
Let’s say the inflation target is higher than the current inflation rate.
The central bank will then come up with various policies to stay within the inflation target.
If interest rates are raised, the currency could be bought and become stronger.
Because of this movement, investors keep an eye on central bank policies.
You can check the status of prices against the inflation target set by the central bank with economic indicators such as the consumer price index.
4. Long-term interest rate
Long-term interest rates are determined by buying and selling in the bond market.
If you are thinking of medium- to long-term operation, you should check it often.
There are the following differences in interest rates depending on each country.
- US dollar (USD)
- Dollar-straight currency pairs such as the euro-dollar and dollar-yen are often affected by long-term interest rate trends in the United States. In the United States, the zero interest rate policy and quantitative easing were implemented in response to the financial crisis caused by the Lehman shock. After ending the zero interest rate policy in 2014, the policy interest rate has been gradually raised.
- Euro (EUR)
- In the EU, each member country issues government bonds, but each member country has a different yield on government bonds. Therefore, with regard to the euro, the yields of government bonds of each country are not very helpful. However, the yield of German government bonds, which is one of the most influential EU member states, and the state of the yield spread between Germany and EU member states affect the euro greatly, so it is recommended to check them too.
- Japanese Yen (JPY)
- Interest rates remain very low as the Bank of Japan implements quantitative easing under the Abenomics monetary easing policy.
5. Rating agency rating
Rating agencies have a significant impact on the exchange rate by raising or lowering the rating of government bonds.
You should pay attention to the ratings of the following three companies.
- Standard & Poor’s (S & P)
The currency of the country that issues the government bonds is also bought and sold so that it is linked to the ratings of the government bonds performed by these three companies.
Let’s say Fitch downgrades New Zealand’s government bonds.
Then, investors are pessimistic that the risk of default has increased, and the NZ dollar will depreciate.
On the other hand, if you raise the rating of government bonds, it will be well received and the NZ dollar will rise.
Be sure to check the rating of the rating agency as it can be used as a basis for predicting the exchange rate.
6. Correlation with other investment products
This is a common feature of the currencies of resource-rich countries, but some currency pairs have a high correlation with other investment products.
For example, the Australian dollar price is linked to prices such as gold and silver.
When exporting gold and silver, the higher the resource price, the higher the export value.
And if the export value increases, the economy of the home country will be enriched, so the value of the currency will increase has an influence.
The mining industry is thriving in Australia, with iron ore at 28.6% and coal at 16.3% by total export items.
Since nearly 50% of export items occupy the mining industry, the value of currencies fluctuates in tandem with price fluctuations such as gold and silver.
The Canadian dollar is also known to be highly correlated with WTI crude oil prices.
Canada is a crude-oil-producing country and exports a large amount of crude oil to the United States.
WTI refers to crude oil calculated in regions centered on Texas and New Mexico, but originally, the United States consumes more crude oil than domestic crude oil production, and imports a lot of crude oil from Canada.
Therefore, the Canadian dollar is said to have a high correlation with the WTI crude oil price.
In recent years, the increase in US production of shale gas and shale oil has led to more crude oil imports from Canada.
As a result, the correlation between the Canadian dollar and WTI crude oil prices remains strong.
In this way, depending on the currency pair, it is necessary to check the prices of investment products that are highly correlated.
What is MT4 (MetaTrader4)?
Speaking of MT4, as a trading software used by Forex traders all over the world, it is the most popular software in the world of forex.
It is indispensable to recognize that it is difficult to continuously make profits by FX trading without improving the technology of traders who use it, no matter how sophisticated MT4 is.
MT4 is an FX trading software developed by Russia’s MetaQuote, whose official name is Meta Trader 4.
In addition to being free to use, it not only allows chart analysis, but also supports automatic trading with a program, making it a software widely used by Forex traders around the world.
Many chart analysis software and trading software are provided by Forex companies, but MT4 is provided via various Forex companies.
Also, because it is easy to use, there are many traders who use MT4 for chart analysis and use the trading tool of another company for actual trading.
What are the benefits of MT4?
First of all, there are 4 main advantages of MT4 trading platform.
1. MT4 is available for free
MT4 is a trading software that can be used free of charge.
Most of the trading software provided by Forex companies can be used free of charge, but there are many cases where trading software is charged.
Even if the software itself can be used free of charge, in most cases there is a charge for the distribution of exchange data, and some high-performance trading software has a very high threshold.
MT4 is available free of charge.
Even though it is free, it boasts more analytical power than other paid software made.
It is no exaggeration to say that even if you search the world, there is almost no software that boasts the same analytical power and amount of information as MT4 for free.
2. MT4 has an abundance of analysis tools
MT4 has a large number of chart analysis tools listed by default.
From basic technical indicators such as MACD and Stochastic Oscillator to line analysis tools for Fibonacci analysis, you can use a large number of chart analysis tools just by installing MT4 itself.
In addition, MT4, which has users all over the world, provides many unique analysis tools on the Internet.
A large number of tools are provided, from paid tools to free tools, and you can try various analysis methods on the market.
Especially for traders who value technical indicators, MT4 will be indispensable.
Even if you do not have programming knowledge, if you have a certain knowledge of MT4, you can download a myriad of analysis tools and master technical analysis by searching sites all over the world.
Therefore, from the perspective of analysis, MT4 is a trading software with infinite possibilities.
3. MT4 provides not only FX but also Stocks, Futures, Commodities, etc
The foreign exchange market is influenced by various markets such as the stock market and the commodity market and forms price movements.
Therefore, when analyzing the foreign exchange market, it is necessary to at least understand the stock market.
In the case of chart software provided by Forex companies, it can be used for displaying and analyzing foreign exchange charts, but in most cases, it is not possible to display charts other than the foreign exchange market such as the stock market.
Therefore, when looking at stock market charts, it is necessary to launch tools for online securities.
However, many Forex companies offer MT4 that can display not only exchange charts but also stock charts of each country.
Depending on the MT4 handling company, there are companies that handle only exchange charts, but there are a large number of Forex companies that can use MT4 , and in many cases, MT4 can be used only by opening a demo account.
Using MT4, you can easily build an environment where FX trading is possible while checking the market conditions of the stock market, crude oil market, and gold market on the same MT4 chart.
In the forex market, which is often influenced by other markets, it may be possible to stay ahead of other traders by understanding other peripheral markets.
Beyond just the currency chart display function, MT4 has become an indispensable tool for Forex traders who are checking the status of the entire financial market.
4. MT4 mobile app is available
Recently, it has become possible to use MT4 in apps.
There are few things you can do compared to the PC version, but since you can choose between a demo account and real account settings, beginners who want to start a little can see it for the first time with the app because it is less difficult to start than the PC version.
The following items can be enlarged with the app:
- Customization of chart screen (change indicators, edit objects, etc.)
- Order-Settlement (order method, entry point, currency pair, etc.)
Since it also has the aspect as a trading tool, it is a recommended reason for beginners that you can also perform limit orders, stop orders, profits, and loss cuts.
For beginners, those who have succeeded after operating with the application version should move to the PC version.
What are the disadvantages of MT4?
Although MT4 has extremely high performance and a wide range of uses, it has advantages but also disadvantages. The disadvantages of MT4 are listed below.
1. Conditions vary depending on the Forex broker
MT4 is a trading software developed by MetaQuotes of Russia and adopted by each Forex company.
Also, there are cases where each Forex company customizes it independently, so the specifications may differ for each Forex company.
The foreign exchange market can be roughly divided into three time zones: Tokyo time, London time, and New York time.
MT4 may have a different base point at 0 o’clock depending on the provider.
Therefore, there are cases where Company A’s 00:00 is NY time, but Company B’s 00:00 is London time.
When using only candlestick analysis or elementary technical analysis, the difference in time is not so important, but the time lag differs for each MT4 when using analysis methods that use time such as PIVOT points.
When using MT4, it is essential to confirm at what point 0 o’clock is the start.
2. MT4 is just a tool and non-profit-guarantee
MT4 has all kinds of analysis tools in the world, from free to paid to high-value tools.
While using MT4 is fun in itself, the ultimate goal in Forex is to trade in the forex market and make a profit.
Due to a large number of analysis tools in MT4, there are some traders who just shift to analysis tools and do not improve their trading skills at all.
As will be described later, MT4 is just a tool even if it is a high-performance trading software and it is a human trader who controls the tools.
There are some people who do not improve their trading even if they invest a lot in MT4 analysis tools.
It’s just an illusion that you can win in Forex just by incorporating high-performance tools in MT4.
We should not forget that MT4 is a tool, and it is the patience-required road to improve FX trading to improve trading technology without relying excessively on MT4 while objectively looking at it.
Tips of using MT4 trading platform
Traders all over the world use MT4 to trade Forex.
There are various ways to use it, and if there are 100 people, there are 100 ways to use it.
The following are two points to note when using MT4.
1. Choose the account with low trading cost
MT4 is used for analysis, and in many cases, the tools of FX companies are used for trading.
MT4 can be said to be a very powerful tool as a chart analysis software, but FX accounts using MT4 tend to have wider trading spreads than other accounts.
While looking at the MT4 chart, it is ideal to trade with the MT4 account, but due to spreads, MT4 is often used for chart analysis and there are many cases where the actual trading uses the tools of each Forex company.
MT4 can be used in real accounts and demo accounts.
When using MT4, it is necessary to take flexible measures such as using a different trading company account while considering the spread.
2. Try to master MT4’s trading tools
MT4 is a very high-performance trading software, but even if it says high performance, MT4 is just a trading tool.
There is also a tool that sells analysis tools for MT4 at a high price and is advertised to make profits easily with Forex, saying that you can make a profit without difficulty in the gap time.
However, no tool can win 100% under any market conditions.
Even if it exists, it cannot be sold in the unit of tens of thousands of dollars.
Professional institutional investors can challenge the forex market by arming high-performance computers with software that far exceeds MT4.
From a beginner’s point of view, even if it is an attractive software that can analyze multiple charts and can be used for free, from the point of view of a professional institutional investor, MT4’s analysis tool is just one of many.
It is the person who actually trades that ultimately decides the outcome in Forex trading.
It’s up to humans to finally get the hang of paying high-performance tools for MT4.
Even with a high-performance tool called MT4, it must be said that it is difficult to continuously win in Forex trading without basic knowledge and certain experience in Forex trading.
Automated System Trading on MT4
We have explained MT4 mainly assuming the use of discretionary trading.
MT4 is a very high-performance chart display software, but it can be used not only for displaying charts but also for system trading.
Since MT4 is equipped with an automatic trading function, system trading can be performed by setting a program without human intervention.
However, knowledge of MQL, the language of MT4, is indispensable for full-scale system trading.
There are various types of software dedicated to system trading, including free and paid software.
You can also create and optimize a system trading program (EA) yourself, so you have a higher degree of freedom than MT4 in automatic trading of FX trading.
Although it is a system trade with different difficulties from discretionary trading, MT4 can be very useful software when pursuing a mechanical trade system trade based on rules.