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#7: Which Are The Best Forex Pairs To Trade?

Still, the 0. If we look at the median monthly change, the contrast between 2. The median volatility is calculated by sorting the individual volatility values V n and either picking the middle one for odd N or calculating the mean of the two middle-most rates of change for even N. As you can see, the mean and median volatility of the studied currency pairs varies even less than the rate of change. Below, you can find six charts that illustrate and help to compare the differences in volatility for the studied currency pairs.

One of the most intuitive methods to detect Forex trends is to use a moving average. We calculate the mean and median number of consecutive closes above and below a period daily, weekly, and monthly moving average both simple and exponential. Unlike previous measures of trendedness, consecutive closes below or above moving averages seem to result in more significant differences between the pairs.

The comparison of other pairs is well illustrated by the charts below. The table for the consecutive weeks above and below the moving averages is presented below. The table for the monthly data is presented below. On the charts below you can see the illustration of the data presented in the table above. The first two pairs performed well also by other metrics. A blunter way to measure trends is to record the average number of consecutive bullish or bearish candles. Yet, it hints that average bullish and bearish streaks are quite longer at some currency pairs compared to others.

Important note: The past performance is not an indication of the future performance. This means that it might be impractical to base actual trading on expectations of the trending behavior to remain the same as they were during the studied period. And now to the most important stuff — a MetaTrader script that can be used to get the same data that is presented in this post and even more. You need to compile TrendStats. The script, when run on any chart, will analyze a list of currency pairs given via input parameters on a range of timeframes also given via input parameters and on a given time period also changeable via input parameters.

You will notice a strong bearish response off the trend line. This would be considered our trend confirmation and prepare us for a short position.

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The fourth arrow is also blue, because the trend is already confirmed. In this manner, a return and a bounce from the trend would give us another trading opportunity.

Top currency pairs to trade

The two short trades in this case both create a trading opportunity, though the 3 touch in general will typically provide a better return to risk ratio. Volumes are helpful for identifying emerging trends. The reason for this is that in many cases the Forex pair will start trending after the volumes have increased. In this manner, the impulse trend moves appear during higher trading volumes.

Corrections on the other hand appear during lower trading volumes. When volumes are high, there is a lot of action in the market. Therefore, high volumes are offer insights into emerging trend impulse waves. This is the same trend from the second example in this article. Notice that the trading volumes pretty much respond to impulses and corrections as shown with the arrows above.

The trend reversal comes afterwards. However, using the Volume indicator with the understanding of this limitation in mind, can assist you in your trend analysis nevertheless. Since you are now familiar with the process of identifying trends on the chart, it is now time to discuss a way to take advantage of trading currency trends. We will now exhibit a trend trading strategy, which is straight forward and relatively easy to implement. We are going to use an assistant indicator to support our trend trading strategy.

When the faster line breaks the slower line in bearish direction while being located above 0, we expect the price to start trending in bearish direction. When the faster line breaks the slower line in bullish direction, while being located below 0, we expect the price to start trending in bullish direction. The MACD indicator also has a histogram. This histogram displays the exact difference between the faster and the slower line. If the histogram is positive, then the faster line is above the slower line — long signal.

If the histogram is negative, then the faster line is below the slower line — short signal. The Moving Average Convergence Divergence is also good for spotting divergence between price and the indicator. If the price is increasing and the MACD is decreasing, then we have a bearish divergence, which indicates that the trend is likely to reverse. The same is in force but in the opposite direction for a bullish divergence pattern. If the price is decreasing and the MACD is increasing, then we have a bullish divergence. In this manner, we expect the bearish trend to switch to bullish activity.

We can try to match signals from the MACD indicator and the potential emerging trend line and perform a volume analysis.

How to Find the Best Trending Forex Pairs

Imagine you have an upward price movement on the chart. At the same time, the MACD signals a bullish crossover below the 0, supporting the price increase. In this case, we can look to go long until we see a contrary signal from the MACD.

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A stop loss order should be placed here below the recent swing bottom. The same technique is in force for bearish trends. If the price starts accounting for lower tops and lower bottoms, we use a bearish MACD crossover above the 0 in order to short a currency pair. The image below will show you how exactly this trading strategy works.

The date is Jan 5 — Jan 8, This example starts with a bullish MACD crossover.