Thanks to technological advances, global markets are now at our fingertips. Yet, profitable trading in Nigeria is still challenging. As a professional, I am often asked to identify the most lucrative markets. Unfortunately, there is no one-size-fits-all, but the following observations could come in handy.
In my experience, trading based on price action is fairly reliable. It works in Forex and other markets. Basically, you should focus on the “footprint” of your asset. Here is my personal selection for 2022:
1. EURUSD – Euro/Dollar (Spot)
The rate shows the value of Euros in US dollars. As the primary major forex trading pair, it is found on all popular platforms. If the Ask price is 1.1756, you need to pay 1.1756 dollars to buy one euro. Therefore, the EU currency is stronger.
Price signals are particularly pronounced on the daily and 4-hour chart. You can use support and resistance quite comfortably, and trends tend to be sustained. Ranges are also relatively lengthy. The biggest advantage is that many of the signals are “self-fulfilling”.
2. GBPUSD – Pound/Dollar (Spot)
If the rate is 1.4100, 1 pound Sterling is worth 1.4100 US dollars. This means the British currency is stronger than its counterpart. In comparison with EUR/USD, this pair is more volatile, so the moves, trends, and breakouts are all bigger.
Price action signals are also stronger compared to other Forex pairings. This instrument is less popular, so it also consolidates less. This means the potential for profitable price action trades is higher.
3. USDJPY – Dollar/Yen (Spot)
As of this writing, the exchange rate of the U.S. dollar against the Japanese Yen is 114.47. This means the American currency is much stronger, one dollar costs 114.47 yen. The dynamics are relatively erratic even in the long term, but you can spot predictable trends from time to time.
Price action signals are also quite reliable. What’s more, the market is very technical, so it reacts to key levels with high accuracy. You can read more about candlestick patterns for this and other pairs in the FXTM library.
4. NZDUSD – New Zealand Dollar/US Dollar (Spot)
Currently, one Kiwi (NZ dollar) costs 0.69 US Dollars, so it is weaker than the American currency. The chart moves sideways around half of the time, and it is convenient to trade when a price signal appears.
5. Gold (Spot)
XAU/USD reflects the value of gold in US dollars. The most popular precious metal moves quite consistently between consolidation periods. The latter may be confusing and difficult to trade. Sometimes, volatility rises, boosting the potential for profit.
6. Crude Oil – Commodity (energy)
You can trade oil via futures or CFDs on Forextime. The most popular energy commodity experiences lengthy and robust movements. Support and resistance are quite reliable. Yet, this is not an asset for beginners as it gets volatile at times.
This index reflects the collective performance of 500 giants whose stocks are traded on the New York Stock Exchange and NASDAQ. Their shares usually trend higher, so I recommend “buying and holding”. On the downside, any gains can be wiped out quickly in times of turmoil. You need an in-depth understanding of the price dynamics.
Don’t look at every single market. You could trade hundreds of assets in theory, but this would backfire in practice. Focus on the most liquid instruments and markets with the most consistent price action. The more obscure an asset, the more difficult it is to trade. Here are a few examples:
Why GBP/USD Is Better Than EUR/GBP
GBP/USD is the best combination with the pound. It typically has stronger and smoother upward and downward movements, and the inside bar signals are also more pronounced. Choppiness is rare. EUR/GBP typically moves more confusingly and has fewer decent signals.
Why Gold Is Better Than Silver
Gold beats silver in terms of liquidity and movements. It is more popular and experiences larger swings and trends, which benefits price action traders. Finally, signals for gold are stronger and clearer. Silver often has messy dynamics, so it is more difficult to follow.
Forex brokers give access to hundreds of markets, but this does not mean you have to engage them all. The logic described above is applicable to many assets (currencies, commodities, indices, and even some equities), but you need specialization for long-term success.