The two factors that play a key defining role in choosing currency pairs are volatility and liquidity. There are two types of currency pairs: the liquid currencies and the illiquid currencies. The liquid currencies include USD/EUR, JPY/USD, GBP/USD, EUR/GBP and AUD/USD etc. Even though profits do not largely depend on currency pairs, trading using liquid pairs ensures smooth operations along with stability and low spreads.
Yeah, liquid currencies have a better stability and can ensure the return, but you cannot expect for the same, without putting an effort in researching and learning.
Start with major pairs. These pairs have high liquidity and low spreads, which makes them profitable and affordable to trade. However, exotic pairs are highly volatile. Please avoid them unless you have some experience because they require in-depth knowledge of the countries’ economy and politics which are involved in the pair.
Many experts say that it is better to trade major currency pairs as they are more liquid and less volatile. They also suggest trading one currency pair at a time, especially beginners, as it creates less confusion and chances of losses. Some of the most popular pairs that traders like to trade include EUR/USD, GBP/USD, AUD/USD, and USD/JPY.
If you are a new trader, pick EUR/USD. It is an easy pair to trade. Most of the new traders begin with it.
Traders should choose currency pairs that are stable, have low spreads, and high liquidity. So based on the above criteria, I think major currency pairs make good trading pairs. However, traders can also consider pairs outside major currencies which trend well and have medium to low volatility.