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Benefits & Risks Trading EURUSD
Benefits of trading EURUSD
- It's a very stable currency.
- There is a lot of liquidity in the market for this currency pair.
- The EURUSD is traded all over the world, which means that it can be bought and sold at any time of day.
Risks of trading EURUSD
- High EURUSD volatility.
- If you trade on margin you need to make accurate forecasts.
- Many people are trading with algorithms that you have to manually analyze and react to a bullish market.
What is the EURUSD and why trade it?
- The EURUSD combines the two largest currencies in the world, the US dollar, and the Euro.
- The EURUSD accounts for approximately one-quarter of trading in global foreign exchange markets, according to the BIS.
- The EURUSD is the most liquid pair, meaning the ability to enter and exit a trade is easier and will consistently have the most competitive spreads.
- As it is the most traded currency pair, it can be possible to find more information and ideas as to the potential direction of the currency.
What drives the EURUSD?
The EURUSD is considered fairly new in the scheme of currency trading, having only started trading on the 1st of January 1999. There are many drivers of the currency, including but not limited to:
- Economic data being released such as US or EU unemployment rates or inflation.
- News events around the world e.g. the war in Ukraine.
- Speeches and conferences of central bankers from the Federal Reserve and ECB.
- Technical analysis e.g. support and resistance lines being broken.
- Interest rates e.g. the US having higher interest rates than the EU or vice versa.
When is the most active time to trade the EURUSD?
The EURUSD is the most actively traded currency pair in the forex markets. The Euro and US dollar will be most active in the EU and US Sessions of the markets and least active in the early hours of the Asian session.
What are the advantages of trading the EURUSD?
- You can trade the EURUSD 24 hours a day, five days a week.
- You can trade the EURUSD with leverage using a broker like Global Prime.
- As it is the most active currency pair, the liquidity on offer is the deepest and pricing the most consistently competitive.
When can you trade EURUSD?
You ideally want to day trade the EURUSD between 1300 and 1600 GMT to maximize efficiency. During this period, you'll see the biggest moves of the day, which means greater profit potential, and the spread and commissions will have the least impact relative to potential profit.
What happens when you buy EURUSD?
If you're buying the EURUSD, you believe the price of the euro will strengthen against the dollar. The base currency will fall compared to the quote currency. If you're selling the EURUSD, you believe the price of the euro will weaken against the dollar.
Should I trade EURUSD?
The EURUSD almost always guarantees volatility at all times due to the many factors that impact on its price and can offer great trading opportunities for investors.
What platforms can I use to trade EURUSD?