Currency indexes are useful tools for measuring the strength of currencies. But there is usually no objective answer to whether a currency is weak or strong, it's very relative as currencies are traded in pairs. Something worth considering is their liquidity. There are major, minor and exotic currency pairs; major and minor pairs are more liquid.
Every pair has its own specific characteristics. You have to find out your own trading edge. Only you know what you understand the most. Learning is a long term tadious process. Everyone has to go through it if they want to make consistent money in forex trading.
There are four main currencies, which are considered to be major ones. These are usd, jpy, gbp and eur. Actually, everyone knows about it and it doesn't matter whether you are a trader or not. I believe that if you consider trading only strong currencies, then you can pick all the pairs which include two of these currencies, for example, usd/jpy, gbp/eur and so on so forth. Anyway, you shouldn't trade only these currencies, because there are lots of other currencies whch sometimes can be strong. It dependson the current situation on the market.
The strength of a particular currency depends on numerous economic factors, but the quality of a currency's growth prospects is usually the most significant. Traders should have sound knowledge about the economic and political state of the country whose currency they are dealing with.
There are mainly three factors which determine the strength of the currencies: 1. Inflation: Higher inflation in a country means the national currency is losing its value. 2. Economic stability: If the government is economically stable and well established, it attracts more investors. More demand means more supply which also increases the value of the currency. 3. Interest rates: Higher interest rates also indicate high value of the currency.
HIGH RISK WARNING: Foreign exchange trading carries a high level of risk that may not be suitable for all investors.
Leverage creates additional risk and loss exposure. Before you decide to trade foreign exchange, carefully consider your investment objectives, experience level, and risk tolerance.
You could lose some or all of your initial investment. Do not invest money that you cannot afford to lose. Educate yourself on the risks associated with foreign exchange trading, and seek advice from an independent financial or tax advisor if you have any questions.
Any data and information is provided 'as is' solely for informational purposes, and is not intended for trading purposes or advice.
Past performance is not indicative of future results.