Forex Strategy: Trading Tips for EUR/USD Currency Pair

euro-dollarIn forex trading, the EUR/USD is the world’s No. 1 most traded currency pair. Because of this huge volume of liquidity, it’s a central piece in many day traders’ strategies. Plus, the spread for the pair is generally one of the closest of any of the majors, allowing profits to be achieved faster.

Are you looking for ways to gain the edge when trading the EUR/USD pair? First, it’s useful to develop a strategy for trading the Euro that fits your style. You might choose a strategy built around market open prices – often called a European Open Price strategy. Or you might choose a breakout price strategy for the pair. For beginners, there are also some key points to consider:

Do Most of Your Trading During U.S./European Overlap

There are just four hours when the London and U.S. markets are open at the same time – from 8 a.m. EST to 12:00 p.m. EST. Here’s why you should focus your trading during these hours: A large majority of EUR/USD trades take place during overlap hours, and as a result, the volatility of the market is at its daily height. For traders, volatility mean there’s greater opportunity to profit, because price movements are more dramatic. You can still trade during non-overlap hours, but in general, the biggest movements happen when the markets are open concurrently.




Keep Close Tabs on EUR/USD Economic Data

Announcements and policy decisions by Federal Reserve Bank in the U.S. and the European Central Bank for the Eurozone have a strong influence on the exchange rate for EUR/USD. If this is a central focus of your trading, it’s imperative that you learn how to read economic data flowing from these two central banks. This could include changes to interest rates and other policy decisions, or it could include economic reports, including jobs numbers, Consumer Price Indices, bond auctions and PMIs. All of these factors should be a part of your fundamental analysis, because the market movements following these announcements are much more pronounced, increasing the chances for greater gains.


Economic Announcements Increase EUR/USD Volatility

Whenever major economic policies are announced – for example, an increase rate increase appears imminent in the U.S. – the markets tend to react. For traders, this can be a profitable time to trade, as the value of the pair may make bigger swings. Of course, it’s important to use stop losses wisely when major economic announcements are made. It’s always difficult to tell how the markets will react, so setting stop losses conservatively can benefit your trades.

In general, the EUR/USD pair is fairly stable. And its stability along with the massive trading volume is what draws the interest of many day traders, especially beginners. Yet, before you invest heavily, it’s important to learn about the fundamental and technical analysis that goes into winning EUR/USD trades.

About the Author
Learning to trade Forex requires a solid understanding of the Currency Market. A course like "Learn Forex" from Learn to Trade is a powerful tool for helping you understand the role of macroeconomics in currency trading.

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