Characteristics of the currency pair EURUSD
The dollar and the euro, the two most popular world currencies with the highest percentage of use, are most tied to trading markets. At the same time, despite the instability of processes in the world financial markets and their rapid reflection in the state of national currencies, the euro / dollar pair resists them as steadily as possible, and sharp fluctuations in the rate of their quotation since 2008.
Of course, experienced traders recommend trading on the market with the euro-dollar pair - this is one of the few currency pairs.
Currency pair - the ratio of the prices of the two currencies included in this pair on the foreign exchange market. This concept is used in the market to simplify trading, since when buying one currency, a trader or inve.
To designate currency pairs, currency codes established by the International Organization for Standardization (ISO) are used as a standard. They are three-letter, the first two mean the country, the last one is the name of the currency itself, for example:
- USD - United States Dollar, US dollar;
- GBP - Great Britain Pound, British pound;
- CHF - Swiss franc;
- JPY - Japanese yen.
The only exception is EUR (Euro), where the entire three-letter code is the abbreviated currency name.
In the designation of a currency pair, two currency codes are necessarily used, for example, EUR/USD. Places in pairs are also not chosen arbitrarily, but are established by the international ISO standard.
Standardization is used due to the fact that the foreign exchange market unites trading platforms around the world. To avoid discrepancies in exchange terminals and problems with quotes recalculation, common designations are used on all exchanges.
The exchange rate is the ratio of one currency to another. It determines, for example, how many dollars a euro is worth. When you see a currency pair, it represents the amount of the first currency for which the second specified currency is purchased.
Currency rates are divided into modes:
|Floating exchange rates||Managed floating exchange rates||Fixed exchange rate|
|It is determined only by market factors - the state practically does not regulate the exchange rate in relation to the currencies of other states.||The central bank controls the exchange rate formation process. One form of course management is currency corridor. If the course is out of bounds corridor, the state is taking action. The central bank begins to buy or sell foreign exchange, that is, to intervene to correct the exchange rate.||The toughest regime: the central bank country pegs the exchange rate to the currency of another country (or currency basket, which consists of from several of the most common currencies, e.g. dollars and euros).|
Trading volume and volatility change for different currency pairs depending on the movement of the clock hands. You can trade more efficiently if you know which currency pairs are in the spotlight at one time or another. The time of day factor plays a very important role when trading currencies.
Since the foreign exchange market operates 24 hours a day, a trader can closely monitor every market movement and respond to it in time at any time. To develop a successful trading strategy, it is necessary to take into account the change in market activity for different currency pairs depending on different time periods. This will maximize trading opportunities during the hours you are working.
In addition, liquidity for currency pairs varies depending on geographic location and macroeconomic factors. Knowing at what time of day for a particular currency pair the largest and narrowest trading range is typical, you can choose the instrument that is most suitable for your trading strategy.
|Trading Time (UTC)||21:00 - 05:00||00:00 - 09:00||07:00 - 15:30||13:30 - 20:00|
|Exchanges||NZX New Zealand Stock Exchange Wellington, New Zealand.||PX Tokyo Stock Exchange Tokyo, Japan; SSE Shanghai Stock Exchange Shanghai, China; HKEX Hong Kong Stock Exchange, China; NSE National Exchange of India Mumbai, India; SGX Singapore Exchange Singapore, Singapore.||LSE London Stock Exchange UK; EURONEXT Amsterdam, Brussels, Dublin, Lisbon, London, Oslo, Paris; FSX Frankfurt Stock Exchange Germany; SIX Swiss Stock Exchange Zurich; MOEX Moscow Exchange Russia.||NYSE New York Stock Exchange, USA; NASDAQ New York, USA; TSX Toronto Stock Exchange, Canada; CHX Chicago Stock Exchange, USA; BOVESPA Brazilian Stock Exchange Sao Paulo.|
|Leaders in volatility||AUD/USD, AUD/JPY, NZD/USD.||GBP/JPY, GBP/CHF, EUR/JPY, USD/JPY.||GBP/CHF, GBP/JPY, GBP/USD, USD/CHF, EUR/USD.||GBP/CHF, GBP/JPY, USD/CHF, EUR/USD.|
Each session has its own characteristics that a trader or investor needs to consider.
The Pacific session is characterized by fairly low volatility and is the quietest of all trading sessions. Due to the calmness of the market during the Pacific session, trading risks are minimal, but it will not be possible to earn much either.
During the Asian trading session, Tokyo has the largest number of transactions, followed by Hong Kong, Shanghai, Seoul and Singapore.
Despite the fact that in recent years the role of the Japanese Central Bank in the foreign exchange market has diminished, Tokyo remains one of the world's leading financial centers. When trading in Tokyo opens every morning, many traders use the momentum they hold to gauge market dynamics and determine their trading tactics.
The high volatility during the European session reflects a peak in daily trading activity as large traders complete their daily asset restructuring cycle at this time. The European session partially overlaps the Asian and American sessions.
The American trading session includes exchanges on two continents. But the turnover of the trading floors of the countries of South America cannot be compared with the market in the northern part. The trading period in New York is a period of speculation and intrigue of major players. From the second half of the day in the US until the opening of trading in Japan, activity on the market has been declining, which favors dubious transactions.
The choice in favor of one of the type of timeframes for trading is one of the most serious problems of the initial stage of knowledge of the trading activity. Therefore, every beginner should understand the following questions: what is a timeframe, what it is used for, what it is and what type of trading is suitable for.
A timeframe is a time interval that is fixed on the price chart of various assets.
Timeframes have the following designation:
- M1: 1 minute;
- M5: 5 minutes;
- M15 - 15 minutes;
- M30 - 30 minutes;
- H1 - 1 hour;
- H4 - 4 hours;
- D1 - 1 day;
- W1 - 1 week;
- MN - 1 month.
There are many approaches to defining stock trading strategies. Basically, the strategy is determined depending on the degree of the trader's involvement in the market, namely, on the frequency of his exchange transactions. According to this parameter, a large number of varieties of exchange strategies can be distinguished, however, for our purposes, it is enough to divide all trading strategies into two main groups: investing and trading.
|Investing||An active strategy (or trading)|
|It is a strategy of long-term, conservative investments in securities. A conservative investor builds an investment portfolio for a long term, counting on the long-term growth of the selected assets and the stock market as a whole.||Includes medium and short term operations. An active trader can make from one deal per quarter to several deals per day. An active strategy, in turn, can be decomposed into smaller components (medium-term trading, short-term trading, intraday speculation, scalping).|
In the first year of trading, it is best for novice traders to use a staggered, phased dive into the stock market. A phased entry is optimal if you came to the stock market not for emotions and impressions, but for money.
Features of the EURUSD currency pair
Traders and investors who use the EUR/USD currency pair as a trading instrument know what factors influencing the exchange rate should be taken into account. The fundamental factors influencing the change in the euro / dollar rate are closely related to the monetary policy of the United States of America: the discount rate, the level of reserve requirements, operations carried out on the open market. And, of course, the level of unemployment and inflation, gross domestic product, as well as the result of the US military actions. Also, the value of the dollar is directly related to the prices of oil and gold. The rise in prices for these goods negatively affects the US dollar exchange rate.
As for the euro exchange rate, it is even more difficult here, because the eurozone includes 16 countries where the euro is recognized as the official currency. This means that all important events of each of these states can affect the rate of this currency.
It is also worth noting that the euro / US dollar quotes are influenced by cross rates (currencies, without the participation of dollars) with the euro. The most significant levers of pressure on the euro / dollar are the euro / yen and euro / pound cross rates. For example, if the pound rises in value, it will have a positive impact on the euro / dollar pair, and if the yen strengthens, it will have a negative impact and the currency pair will decline.
When trading this currency pair, it should also be borne in mind that its volatility increases during the American and European sessions, since it is at this time that the demand for these currencies increases.
How to start trading EURUSD in Somalia
Euro / dollar is one of the most liquid pairs and is a good option for a novice trader or investor.
To start trading, you need to decide on a trading platform. First of all, pay attention to the functionality and convenience of the system. Everything should be clear so that a trader or investor can figure it out right away. Further, it is important to pay attention to the fact that the site would have access to various assets. This contributes to the development of a trader as a specialist in his field and allows him to develop in different branches of trade.
A good site should also have round-the-clock support, available in all languages, so that a trader or investor can contact on any issue related to the site's functionality. It is important that the user has access to the training material, this is an important plus of the site.
After the site is selected, you can proceed to registration. This process does not take much time, you just need to enter your name, email address and come up with a password.
After registration, a trader or investor can start trading, after making an initial deposit, it is worth remembering that investments should not be large, it is better to choose an amount whose loss will not lead to serious financial problems.