Top 6 Most Tradable Currency Pairs

In the previous article, we have been introduced to the different tradable currencies in the market. Investopedia has given a bird's eyeview of the top 6 tradable currency pairs in the world.

The forex market is the fastest growing marketplace around. Forex trading allows traders to trade a wide range of currencies online, 24 hours a day, five days a week.

Traders also have the luxury of highly leveraged trading with lower margin requirements than equity markets. But before you jump in head first to the fast-paced world of forex trading, you'll need to know the currency pairs that traders trade most often.

Here's a look at six of the most tradable currency pairs in forex.

EUR/USD
The euro and U.S. dollar cross is far and away the most actively traded currency pair for forex traders. Known as "trading the euro", forex traders love this currency pair for the liquidity it offers.

The EUR/USD currency pair tends to have a negative correlation with USD/CHF and a positive correlation with the GBP/USD. This is due to the positive correlation of the euro, the British pound and the Swiss franc.

USD/JPY
The next most actively traded pair has traditionally been the Japanese yen - U.S. dollar pair. Known as "trading the gopher", this pair has been sensitive to political sentiment between the United States and the Far East.

The USD/JPY currency pair tends to be positively correlated to the USD/CHF and USD/CAD currency pairs due to the U.S. dollar being the base currency in all three pairs.

GBP/USD
One of the original forex currency pairs was the Great British pound - U.S. dollar pair. This currency pair is known as "trading the cable", a saying that originates from the days when the markets in New York and London were synchronized by a cable which spanned the Atlantic Ocean.

The GBP/USD pair tends to have a negative correlation with the USD/CHF and a positive correlation to the EUR/USD. This is due to the positive correlation between the pound, euro and the Swiss franc.

USD/CAD
With Canada being the United States' largest trading partner, one can easily see why the Canadian - U.S. dollar currency pair is so heavily traded. It is often referred to as "trading the loonie", a reference to the nickname of the Canadian dollar coin.

The USD/CAD currency pair tends to be negatively correlated with the AUD/USD, GBP/USD and EUR/USD pairs due to the U.S. dollar being the quote currency in these other pairs.

USD/CHF
Another major currency pair in the world of forex is the Swiss franc - U.S. dollar currency pair. Known as "trading the swissie", the franc has long been thought of as a safehaven for forex traders in times of political unrest.

The USD/CHF currency pair tends to have a negative correlation with the EUR/USD and GBP/USD pairs. This is due to the strong positive correlation between the Swiss franc, pound and euro.

AUD/USD
Forex traders love the "down-under" cross of the Australian - U.S. dollar currency pair. Referred to as "trading the Aussie", forex traders trade this pair in large amounts.

The AUD/USD curency pair tends to have a negative correlation with the USD/CAD, USD/CHF and USD/JPY pairs due to the U.S. dollar being the quote currency. As well, the correlation with the USD/CAD is also due to the the fact that both the Canadian and Australian dollars share a positive correlation with each another as both currencies are considered commodity block currencies.

There is a need to read further like A Primer on the Forex Matter as well as Commodity Prices and Currency Movements in order to understand how the different currency pairs work and not the other way around.