It is of utmost importance for individual/retail traders to find the best currency pair to trade. As a retail trader, you will only have $1,000 to $10,000 in your trading account. For you, opportunity cost is a real cost as an individual trader. If you commit your funds to anyone currency pair, those funds cannot be used in other possibly more profitable trades in other currency pairs.

In forex markets, every currency pair is linked to the other one way or the other. As a trader if you adopt a dollar centric view, you risk missing promising trades and opportunities offered by other currency pairs.

Most of the trading is done through the direct buying/selling of US dollar. You should always keep an eye on the crosses in order to gauge the strength/weaknesses of a currency. This will tell you which currency pair is the best to trade.

You may ask, what are the crosses? Currency pairs that do not involve USD are known as Crosses such as EUR/JPY, EUR/GBP, EUR/AUD, CHF/GBP etc. Almost more than 90% of the currency pairs that are actively traded in the forex markets involve the USD. In simple language, over 90% of the all the currency trades have USD on one side of the trade either long or short. So what is so special about a cross that you should know?

Lets make it clear with an example. A good method to trade equities is to trade from big to small. Suppose, you determine that the stock market is bouncing and is expected to rise. But you have limited funds as an individual investor; so you should choose your stocks carefully.

It would be advisable to look at the sector specific indices and find the most promising sector. From there, you would look within the index and find the most promising companies that are expected to perform well over the coming months. This big to small thinking is very solid and you need to think in the same fashion while trading forex.

Cross movements should never be overlooked as they can often hide the footsteps of large players. For example, a major investor may be bullish on Euro due to some fundamental reasons. He may try to fly under the radar and buy Euros against Pound Sterling, Swiss Francs, and Yen etc.

Crosses are extremely important to swing or momentum traders, they are used as forecasting tools to predict which currencies are leading the pack. Ignore the crosses and you will be stuck often with currency pairs that do not move at all.

Limited funds in your trading account means you should always do your selection carefully and try to choose the currency pair that is expected to move the most. But how, by taking a look at the crosses!

Cross movements either work to amplify the move of a major currency pair or minimize the effects. For example, in EUR/USD, if Euro is dropping against US Dollar but rising against the Pound, the net effect would be to limit the size of the EUR/USD fall. If ERU/GBP is rising, it is telling us that the Euro is outperforming the British Pound.

Since you have limited funds, which currency pair is the best to chose? Any EUR/USD selling pressure is likely to be offset by the buying pressure of EUR/GBP. GBP/USD sales will likely to be amplified by the cross sales EUR/GBP.

Since, EUR/GBP is rising; it would be better to short British Pound instead of Euro. This means you should short the pair GBP/USD; the chances are you will make many pips. If we had randomly picked one of the two currency pairs for shorting, we may have missed a good opportunity.

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