Testing a currency pair is the foundation of forex trading. To do this, the plan must first be stored. The use of plans allows traders to check which currency pairs are the best and allow for higher profits. For example, if USD / CHF, GBP / USD and EUR / USD are tested using the plan, and the results show that the USD / CHF has reacted positively, this currency pair is concentrated on more than others.
The first rule of the trading currency is never entered into trade without researching. The Forex market is based on researching the market and analyzing different currency pairs available to be exchanged. It is recommended that every trader have a plan place before entering the Forex market. However, every plan must be tested before entering the market. This can be done through a demo account.
Another rule in terms of trading currencies is to never trade the unknown currency pair. Trading involves a lot of risks. And that, it is understandable that there are many currency pairs available to trade with it may be extraordinary. However, it is not recommended that a trader just choose a currency pair to trade. A large amount of money can be lost through this form of thought. With a pre-tested currency pairing, it allows traders to have a fair idea about how each works. Thus, going for a predictable currency pair is always the best choice.
Every currency pair reacts differently with external influences. For example, some currency pairs can be affected by the government’s deficit or surplus, while others will not be influenced by it. Fundamental analysis allows traders to determine which currency pairs are affected and which are not. Every couple cannot be predicted in their own way. Thus, using information found through fundamental analysis and testing a currency pair in a demo account, a trader can get a fair idea from each partner to react in certain situations.
Technical analysis is also the main key to testing every currency pair. It has been shown, through a large number of studies, that some currency pairs can be found easier than others through technical analysis. For example, through moving averages, the money flow index and relative strength index. However, finding these differences through technical analysis is not easy to do. Only the experience of traders can find a little difference.
Because every currency pair is different, it’s up to the trader to find the most suitable for them. The chosen currency pair must allow them to fulfill their goals when it comes to the Forex market. And that, it must be according to their personality and their situation is. For example, a trader who only trades a side job. This will limit the amount of time they can spend on the forex market. Thus, they will need a low-risk currency pair, which does not require constant supervision and is quite predictable. The use of mentors can also help traders. The mentor can examine their traders and personalities and based on years of experience and their assessment skills, can provide educated advice on traders.