How to trade EUR/USD?

It is the most popular currency pair in the foreign exchange market. It sports the highest trading volume in comparison to other currency pairs. The trick is to know how to trade EUR/USD. This requires knowledge of the events with the greatest influence on these currencies.

The EUR/USD Currency Pair

Binary options is subjective to the extent that it can result in huge losses or profits depending on how dedicated and knowledgeable you are in the field. Defining how often you need to trade per day is a thin margin between being greedy and knowing where to stop. Or should we say, making profits or losses.

The euro and the U.S dollar represent two giant economic and trading blocs and are the world’s two largest currencies. Unsurprisingly, the EUR/USD currency pair is part of what traders in the foreign exchange market call the ‘Majors Currency Pairs’. These pairs have the US Dollar quoted either as the base currencyThe base currency is the currency against which exchange rates are generally quoted in a given countryor thecounter currencyThe counter currency is the second currency in that pairing. A slash is used between the currency and counter currency to indicate their relative valuesand they are the most frequently traded. EUR/USD is impacted by many factors and amongst the most obvious ones, is the health of the European and American economies. The other factors to keep in mind while trading this particular currency pair are discussed below.

Factors to Consider to Trade This Pair

For beginners in the field, the EUR/USD makes an excellent pair given the combination of liquidity and volatility and given the. fact that the currency pair’s trends are highly predictable.. However, this does not remove the need for market analysis and risk management. This is because the financial markets can get volatile unexpectedly, especially following unforeseen global events or important data releases from influential bodies.

As such, it is always advisable to be up to date with economic releases in the U.S. and countries in the Europe Union. The U.S. NFP report, for example, plays an important role because it determines the future trend of the dollar and has the potential to bring it significantly down or send it higher. In Europe, the Consumer Price Index and releases from the European Central Bank are worth monitoring.

Other events that influence the EUR/USD pair is the interest rate differential between the European Central Bank (ECB) and the Federal Reserve (Fed), GDP growth, inflation levels and unemployment rates in both economies. The importance of these fundamentals cannot be overstated.

Strategies to Apply When Trading EUR/USD

Three strategies can be used while trading the EUR/USD pair:

Buy Or Sell The Pullback

The trends of the EUR/USD currency pair often zigzags up and down taking its price from one level to another in a positive feedback loop that can generate considerable momentum. However, this swift movement can end with a shift in the supply/demand equation. The pullback strategy uses this counter trend movement to identify important support and resistance levels that should end the price swing and restore the initial trend direction. These levels often come at prior highs or lows.

Buy The Breakout/Sell The Breakdown

The EUR/USD tends to go back and forth within confined boundaries over extended time lapses. This generates well-defined trading ranges and trends. Traders often benefit from low-risk trade entries during these phases. This happens when the support/resistance levels break, giving way to a strong rally or selloff. A good timing accounts for a lot.

Enter Narrow Range Patterns

The EUR/USD also prints narrow range price bars. These bars lower volatility and raise apathy levels. This gives a considerable entry signal for a breakout or breakdown. With this strategy, traders enter positions within the narrow range pattern, with a tight stop in place in case of a major reversal.

The Closing Line

The above given information, tips and trading strategies are very useful when trading EUR/USD. Like all investments, trading the currency pair carries a certain level of risk. Let your intellect, and not your emotions, guide your trading decisions.

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