How to trade EUR/USD?

EUR/USD is one of the most traded currency pairs in the world and it forms part of the “Majors.” This pair represents the world two largest economies and it has faced most volatility since the inception of the euro in 1999. It is thus the most liquid currency pair in forex and consists of the two major currencies worldwide – the U.S. Dollar and the Euro. Here’s what you need to know about this asset.

The EUR/USD Currency Pair

The amount of U.S. dollars in circulation is controlled by the Federal Reserve Bank (Fed), and all actions take place during the scheduled Federal Open Market Committee (FOMC) meetings.

The Euro, on the other hand, is the second most traded and the largest reserve currency across the globe. It is the official currency of the European Union and it has been adopted by 19 to 28 states, with Germany and France as the predominant ones.

The EUR/USD forms part of the “Major Currency Pairs” in the foreign exchange market. Majors have the U.S. dollar quoted either as the Base Currency or the Counter Currency and they are also the mostly traded ones on the market.

Here, the EUR/USD pair is hugely impacted by various factors, amongst which, the obvious ones, are the health of the European and American economies.

Trend of the EUR/USD

Let’s have a look at the trend of the EUR/USD pair since the beginning of 2018. As you can see in the chart below, the asset is seen much volatile and this is not only for January but the currency pair is always affected by events and major news.

Now that you are accustomed with the EUR/USD pair, let’s learn how to trade it.

Steps to trade EUR/USD:

  1. Check your leverage value, this can either be 1:50, 1:100 or 1:200.
  2. Select the trading tool – FX/CFD.
  3. Select the EUR/USD pair and the trading volume or lot you want to trade on.
  4. Select your Stop Loss and Take Profit.
  5. Opt for BUY or SELL.
  6. You can monitor your trades and close it whenever you wish.

The forex market is open 24 hours a day, 5 days a week. However, that does not mean you should trade whenever you want, it is advisable to trade when the currency pair is active and there is lots of volume and transactions happening. In this case for instance, it is recommended to trade the EUR/USD pair during these schedules:

  • American Session (New York – USD) – 12:00 GMT – 20:00 GMT
  • European Session (London – EUR) – 07:00 GMT – 16:00 GMT

Strategies to Apply When Trading EUR/USD

3 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.

Ready to trade EUR/USD?

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