Trading Minor Pairs Can be More Profitable in Forex

Trading Minor Pairs Can be More Profitable in Forex

Submitted by adil on Tue, 07/29/2014 - 19:00

Learn How to Trade Minor Pairs!

There is an astonishing trend among FOREX trading gurus to only focus on major currency pairs when providing training to new traders. If you read online tutorials and follow blogs of renowned FOREX traders, you will find that almost all strategies are designed around major currency pairs and at the end, it is usually remarked they will also be applicable on all other FOREX pairs. Are minor currency pairs really that insignificant to totally ignore them? Let us review the options.

The Number Game:

New traders are encouraged to trade more on EUR/USD, GBP/USD, USD/CHF and USD/CAD.

The table below demonstrates the maximum value fluctuations of different currency pairs shown in percentage for the last three years. Effectively, these percentages depict the value of the biggest winning trade you could make without using leverage on the respective currency pairs.

It is interesting to see that major pairs failed to provide extensive profit opportunities in these years. EUR/USD and GBP/USD offered the most limited opportunities during the years 2011-2013.

The currency that has performed the most consistent over the three years is the Japanese Yen. Combining Yen with any other currency has relatively resulted in better chances of profits than all other currency pairs. Only during the 2010-2011 Swiss Franc was a better performer than Japanese Yen.

So why actually FOREX gurus insist on trading major pairs?

Such behavior is due to following reasons:

• Trading hours: The trading hours for EUR, USD and GBP are better suited for traders currently in Western countries due to similar time zones.
• Manageable spread: The major pairs offer low spread, which means the new traders lose less amount of their capital paying it.
• Technical analysis: Major currency pairs can be easily analyzed using the tools and methods currently available on the internet as most are designed around them.
• Proven strategies: Most strategies have been exclusively tested to work with major currency pairs. There are not enough results which indicate the trading strategies work efficiently with minor pairs.
• Training material: Most internet resources provide tutorials and training material covering only the major currency pairs.

Do the above reasons mean traders should forget minor pairs?

No. Here are the answers to all the above arguments, for the sake of simplicity we will consider Japanese Yen:

• The Japanese time zone is considerably different than the European/North American time zones. But, the trading on Japanese Yen is available during the Western time zones.
• Paying for higher spread should not be a problem as the profit margin offered by the minor pairs will easily balance it out provided you trade with a mid or long term strategy.
• Current training materials, analysis tools and strategies can be used to trade minor currency pairs with little changes.

Considering the profitability of trading minor currency pairs, making a little effort should not become a hurdle for any FOREX trader.