The currency pair EUR / USD is one of the most important main currency pairs. Both the euro and the US dollar are important global currencies with significant trading strength and practically infinite liquidity. Traders who trade EUR USD bet on changes in the exchange rate.
Market participants who trade with a long position EUR / USD bet on an appreciation of the euro and open a long position. Conversely, investors who trade a short position in the euro dollar expect the euro to depreciate.
The EUR / USD currency pair at a glance:
- belongs to the top Majors
- High liquidity
- Trades are usually executed immediately
- Can already be traded by forex beginners
- Main trading hours are within the London- + New York- Session
Trading EUR / USD with Forex: Flow of a currency transaction
In practice, FX transactions are concluded with a click of the mouse and in a split second. But there is the same pattern behind every currency transaction. If a long EUR / USD position is opened (the investor expects the euro to appreciate), there are three transactions (shown in simplified form). In the first step, the investor takes out a loan in USD on the money market. In the second step, he also deposits this money on the money market in EUR. If the investor is correct in his assessment, the exchange rate ratio subsequently changes in his favor. In this case, the entire balance on the EUR investment account is not required to repay the loan on the USD credit account. The difference corresponds to the profit. Market participants who trade euro dollars with forex thus act simultaneously as buyers (here euros) and sellers (here dollars).
By trading with the EUR / USD currency pair, for the period of buying euros bought and dollars sold. The purchase decision should be made if an upward trend in the euro currency or a currency that is strongly influencing the euro is to be expected.
How to Trade the EUR USD (Warning!!)
EUR USD exchange rate in quantity and price quotation
Most exchange rates today are given in the format of the so-called quantity quotation. The quantity indicates how many units USD are paid for EUR 1.00 on the FX market. Some media give the euro-dollar exchange rate differently in the format of the price quotation. This indicates how many units have to be paid EUR for 1.00 USD. The price quotation is the reciprocal of the quantity quotation.
The quantity quotation is also referred to as indirect quotation and, in the case of the EUR / USD currency pair, indicates how much 1 EUR is converted into US dollars.
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Experience with the EUR / USD currency pair
When trading with the EUR / USD currency pair to take into account the daily high fluctuations in the purchase decision. Accordingly, more than 1% of the trading capital should not be invested. Except the trader can rely on experience and a good forex strategy. But even with a good gut feeling and through current market analyzes, as well as a historical EUR / USD diagram, the risks of an unpredictable exchange rate change for EUR €, US dollars or both currencies cannot be neglected. Trading EUR / USD with Forex is already recommended for Forex beginners.
In order to be able to make a good trading decision, it is useful for the decisions of the ECB, as well as the Fed, the US American Central Bank to keep an eye on.
The knowledge of the influences on the two majors, as well as the peculiarities of the currency pair should be followed and taken into account before a trading decision.
The US dollar is not only the key currency in the EUR / USD currency pair. The US dollar is the most widely used form of payment worldwide. For many countries, the US dollar has taken over the validity of gold and acted as a reserve currency.
In 2010, the total trading turnover of the EUR / USD currency was just under 85% per day. This alone shows the high relevance of this forex currency pair. In the meantime, raw material prices are traditionally traded in US dollars. The market entry of the euro and the merger of 17 countries meanwhile gave the US dollar a currency at its side with the EUR.
This currency pair is in constant motion due to trade influences, raw material deposits and debt levels. In 2005 and most recently in 2015, the EUR / USD currency pair reached its lowest level of 1.1727. The US dollar is currently at the so-called nine-year low.
In periods of low volatility, traders can achieve average results with this currency pair. Furthermore, even in weakly volatile times there is a risk of loss in Forex trading.
The EUR / USD currency pair is used to connect two very heavily traded currencies, one high liquidity thanks to strong volatility.
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Tips for Forex trading and EUR / USD trading strategies
Forex trading strategies and forex trading signals should especially be tried out by inexperienced forex traders with a demo account before real use. When trading real money for the first time and in all subsequent trading decisions with one of the most volatile EUR / USD currency pairs, the risk should always be included in the trading decision.
Possible EUR / USD trading strategies
- EUR / USD High Noon
- Morning Buy EU
- Morning Buy US
A simple EUR / USD trading strategy is the EUR / USD Forex contra-trend strategy.
For the right trading strategy, it is important to include the trading rooms, political developments and the times when the economic data is published in the trading decision.
- Stock exchange news, Trading charts and historical data help you choose a sound forex strategy. Despite the strategy, the risk of loss associated with every trade should never be disregarded and a stop placed below the financial pain threshold.
- Private traders achieve good profit opportunities if they make trading decisions within normal trading hours. During this period, traders move in the European session, which can also be referred to as the London session. Online broker newsletters, current market data or social media information from the community should respond directly to the smartphone or iPhone. This allows traders to react immediately to news and corresponding price changes.
- The EUR / USD currency pair is directly influenced by political, economic and social changes in purchasing power within the United States and / or Europe. When it comes to EUR / USD trading, it is advisable to have a critical eye on both the USA and the Eurozone.
- As a rule of thumb: As soon as the ECB or the Fed issue an interest rate decision, action is taken hip, trendy, popular. Course reactions usually occur immediately. Furthermore, if the key interest rate is increased, the currency of the country currently offering the highest return is bought.
- Stop loss or trading in the options market somewhat reduces the risk of loss and is therefore appropriate especially for traders who want to rely on a level of security despite the risky trading with EUR / USD.
- Experienced trading includes a reputable online broker. Click here for the current Forex Broker Test.
For trading the EUR / USD currency pair, hourly developments in Europe or the USA can have a direct impact on the currency pairs. Traders are successful here who, on the one hand, deal with the complexity of both economic zones and their political decisions and, on the other hand, are seriously interested in the publication dates of economic data from the EU and the USA.
Conclusion: The Forex - Trading with EUR / USD holds opportunities and risks
Traders who are aware of the risks of trading in one of the currency pairs with the greatest liquidity can take advantage of good opportunities with growing trading experience and the use of current economic data. Added to this is the optimization of trading decisions through the use of historical data and the forex trading strategy suitable for the trader.