The forex market doesn’t get the same media attention the stock market or crypto gets, yet it is has more trading volume than any other market globally. The foreign currency market is vast and includes the national currencies of some of the largest and most important nations in the world.
The strength of each forex currencies is partially tied to each nation’s economic activity, which can have an impact on the price action between any of the biggest currency pairs. At the very top by trading volume, is the most traded currency pair featuring EUR vs USD.
Introduction: How To Trade The EUR/USD Currency Pair For Beginners
This guide is designed to educate beginners on how to get started trading the EUR/USD pair and get the most out of every pip, whether the market is bearish or bullish.
In forex, the EUR/USD forex pair tracks the exchange rate of EUR/USD. Investors and traders attempt to profit from the price differences that occur due to volatility in the EUR/USD exchange rate.
The EUR/USD chart includes a huge range of information such as the current price of EUR/USD. Chart patterns and technical indicators can often say a lot about the strength of an underlying trend, and help to predict any potential EUR/USD price movements.
Why Choose EUR USD When Trading Forex?
EUR/USD trading is the most dominant forex currency trading pair by total trading volume. Having the most trading volume means that there’s more liquidity to fill orders as the specific buy or sell price.
Trading the EURUSD can be a lucrative venture for a skilled forex trader who has deep knowledge of fundamental analysis, technical awareness, and pays close attention to news and trends.
About EUR/USD Currency Pair: The Brief History Of EUR/USD
Interestingly, despite the dominance in trading volume and popularity, the EUR/USD instrument is only around 20 years old, while most other fiat currencies have been around for a century or more.
On January 1, 1999 the Euro was born. The Euro was first viewed as potential contender to the dollar. A physical Euro was later introduced in 2002, and Euro/Dollar trading stared soon thereafter in the forex market.
Today, it is one half of the most dominant USD pair. However, this trading pair isn’t particularly popular during the Asian trading session, which prefers JPY to USD trading instead.
Major Factors Influencing EUR/USD Price Changes
There are several factors that can have a dramatic impact on the EUR to USD exchange rate. These factors include political factors, environemental issues such as natural disasters, even pandemics like the Coronavirus can seriously shake up markets.
The strength of Europe’s economy versus the United States’ can also potentially impact the exchange rate of the EUR to USD currency pair. Here are more details regarding the role of each major currency to better understand their potential impact on the global economy and what that might mean for price action.
The Role of Euro
According to Wikipedia, the euro “is the official currency of 19 of the 27 member states of the European Union.” This group of nations is referred to as the “eurozone” and is home to more than 300 million Europeans.
It is also is the “second-largest and second-most traded currency in the foreign exchange market after the United States dollar.” Euros are paper notes and metal-based coins, although there could some day be a digital euro. Each euro is divided in one hundred cents.
The euro is also the second most widely held global reserve currency behind the dollar. It represents the economic health of all of the nations within the eurozone.
The Role of USD
The United States dollar is the current global reserve currency and the base currency at which all exchange rates are set. It affords the United States a power position in terms of its economy and has allowed the country to act as the center of finance globally.
Because the dollar is so important to global trade is by far has the largest trading volume and its impact on other markets cannot be understated. For example, on Black Thursday nearly all other assets suffered while USD benefitted the most.
EUR/USD Trading Strategies: Trading The Euro Versus US Dollar Explained
There are more than one way to gain exposure to EURUSD trading pairs. Here we’ll outline the most common methods which include investing and trading, along with all the different types of trading styles and strategies.
Invest In EUR/USD
When anyone thinks markets, they think investing. But EUR/USD investing isn’t as glorious as the rest of this guide has made it sound. Retail investors look to invest in euro dollar pairs, but the price change in forex currencies are typically very small and therefore currencies don’t make for an ideal investment.
Trade EURUSD With CFDs
Rather than investing in the euro dollar pair, you can trade the euro dollar pair instead. Trading forex currencies is typically enhanced by leverage through margin accounts making the traditional small movements much more profitable. However, margin accounts and leverag increase risk associated with trading so risk management tools such as stop loss orders are a must.
Forex Trading Styles for EUR/USD Currency Pair
There are more ways than one to trade the Euro Dollar effectively depending on personal tastes, and their schedule. Here are some of the most common trading styles in forex.
Scalping involves getting in and out of positions very quickly, and in fast succession. Oftentimes scalpers will ride a trade down, and then scalp in the immediate opposite direction on a bounce. The timeframe of trades is often only minutes at a time. Profits are smaller this way, but in fast succession can stack up to a lot of money fast.
Intraday trading strategies all focus on the day trade, where positions are opened and close in a single trading session. Timeframes mostly revolve around the daily chart and anything below as these traders look to close positions so they can rest at night in peace. The next day when they get to their trading desks, they do it all over again.
Swing traders spend much longer time in their positions than scalpers or day traders, sometimes weeks to months. These traders are trying to capitalize on shorter term trend changes across the market. Profits tend to be larger per position, but in theory these traders are missing out on all the smaller intraday moves that day traders and scalpers have access to.
Best Time For Trading The Euro Dollar Forex Pair
Data shows that EURUSD markets are most active between 07:00 to 20:00 GMT while peak hours are between 13:00 and 16:00 GMT. During this period, trading volume and volatility are at their highest historically.
Analyzing the Euro Dollar FX Pair: EURUSD Price Analysis
Getting the most out of EUR/USD investing or trading requires skill, study, and statistics. Combining these factors across fundamental and technical analysis, and well as considering trends in news and politics can help improve the chances of success.
Euro Dollar Fundamental Analysis
Fundamental analysis looks at things that are qualitative and quantitative. Quantitative analysis helps quantify and measure certain data points to discover trends in that data or any notable changes that could provide insight on the health of the asset.
Qualatative analysis focused on what investors might feel about a topic, such as the general hawkish sentiment fron the US Federal Reserve recently, which strengthened the dollar temporarily and had an impact on USD forex pairs.
Euro Dollar Technical Analysis
The field of technical analysis is vast and deep, ranging from things like Elliott Wave analysis to Keltner challens, and other reliable technical indicators. Analysis also includes the study of price movements and patterns. Using charting software traders can plan a strategy, find support and resistance, and know where to place a stop loss.
Euro Dollar Trends Analysis
For another take on markets, traders can also take a look at past trends of EUR/USD and compare to the current trend. For example, a trader can open up the dollar chart and look at USD history over the last several years, and compare it with other currencies trading against the euro. Finally, compare these with the EUR/USD chart to look for any key differences or signals to take action on.
How To Trade EUR/USD With CFDs
Trading CFDs gives forex traders the ultimate flexibility with margin, leverage, long and short positions, and much more, all without being tethered to a expiry or have to pay a sizable premium.
The steps to getting started trading CFDs for forex currencies are as follows.
Step 1: Find A Broker
The first piece of the puzzle is finding a forex broker suitable for your needs, profit goals, and risk appetite. The platform’s reputation must be solid, and have a track record of success, recognition, or industry awards.
Step 2: Make A Deposit
With the right broker chosen, it is time to make a deposit so there’s money in your account to be used as capital for trading. Account capital on a margin trading platform can be maximized depending on the account leverage available.
Step 3: Fund A Margin Account
Once the deposit is confirmed, a margin trading account must be funded before any positions can be taken. Margin accounts are common in forex trading due to the relatively low volatility price movements.
Step 4: Perform Technical Analysis
There is still one more step after funding a margin account before opening a position, and that is making a plan. Performing technical analysis and other price analysis can provide intel about the market and help predict where the market turns next based on statistics and probabilities.
Step 5: Go Long Or Short
With a plan in place and a good read on the market, it is finally time to take a position in the market. Going long means you expect the price to go up, while short positions are a bet that prices will drop instead. Some platforms allow for hedge positions – long and short positions open at the same time.
Step 6: Book Profits
It might sound obvious, but it far more difficult in practice – but you have to regularly book profits. Open positions result in unrealized profit or loss, that is only realized when a position is closed. Because of this, traders can choose to wait through losing positions while underwater while in hopes that markets turn around to avoid losses. Markets can also turn around while rising, so that is why booking profits is important.
Why Trade EUR/USD With PrimeXBT?
PrimeXBT is the only platform around that checks all the boxes mentioned in the steps above and is an award-winning margin trading platform that offers CFDs on forex, crypto, commodities, stock indices, and more.
Among the awards are three awarded from the Forex Awards, one of which specifically included Best Crypto and Forex Broker in 2020. PrimeXBT is noted for having advanced order types such as stop loss orders, built in charting tools, Covesting copy trading and much more all under one roof.
The Covesting copy trading module connects followers and strategy managers together for synergistic profits. Followers can put their capital to work by copying the trades of strategy managers who rise the ranks of the Covesting leaderboard system. Fully transparent risk and success metrics let followers who can’t figure out how to trade forex still get exposure to markets.
For those that are more skilled and would rather trade their own book, the list of forex currency pairs is endless thanks to the flexibility of CFDs and the innovation at PrimeXBT. All the major FX pairs are included, as well as exotics from emerging markets.
Registration is free and takes only a few minutes to get started. There are no minimum deposits on margin trading accounts and positions can be multiplied for more profits than what positions sizes would otherwise allow for.
A full suite of technical analysis tools are also included to give traders a competitive edge when trading, so they can successfully go long or short the EURUSD trading pair.
EUR/USD Investing And Trading FAQ: Commonly Asked Questions By Forex Beginners
Getting into markets for the first time can be intimidating, even if the assets are as familiar as the dollar and the euro – two of the top fiat currencies globally.
Should I Trade EUR/USD?
Trading EUR/USD is recommended due it being the most-traded currency pair of all major currency pairs. The two top traded FX currencies also have the most liquidity and trading volume.
Is EURUSD Good To Trade?
Trading EURUSD makes sense due to the trading pair’s dominance. As the most widely traded forex currency pair, nearly every trading platform and currency exchange offers it, and the exchange rate is among the most important globally.
What Is Negative Balance Protection?
Negative balance protection is something offered by some brokers that doesn’t allow trader’s margin accounts to go negative if they’ve taken a substantial loss. Accounts can be liquidated, however, negative balances are forgiven. Without negative balance protection, traders can be liable to pay back losses.
Which Forex Broker Shoud You Use To Trade The Euro Dollar?
Although many traders are stuck on platforms that utilize MT4 or MT5 (MetaTrader) tools that are behind the curve these days, it is recommend to instead use PrimeXBT which offers proprietary advanced trading infrastructure with the most features and flexibility in the market.
Investing or trading forex currencies can be risky and lead to a complete loss of capital. This guide should not be considered investment advice, and investing in CFDs is done at your own risk.
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