Characteristics of the currency pair EURUSD
EUR/USD is the ticker for the EUR/USD exchange rate. This currency pair is rightfully considered the leading asset in the market, as this tandem represents the two largest economies in the world. In the liquidity ranking, this ticker, which offers traders the lowest spreads, comes first. EUR/USD contracts are especially recommended for newbie traders due to the unique combination of high liquidity and volatility.
Like any other currency pair, EUR/USD represents the ratio of the price of the base currency (Euro) to the quote currency (US dollar). The growth of the European currency entails an increase in the value of the tandem, and the strengthening of the American dollar - a drop in quotations. Basically, EUR / USD is the amount of US dollars it takes to buy 1 Euro. A simple example - the price of a pair of 1.3 means that at the moment for 1 € they give $ 1.30.
What are currency pairs?
A currency pair is the two currencies that make up the exchange rate. A currency pair record includes alphabetic codes of currencies and has the form: base currency / quoted currency.
|Quote base (base currency).||It is the first in the designation of a currency pair (on the left), it is bought and sold for the quote currency.|
|Quote currency (quoted currency).||It stands in the second currency pair designation (on the right), it expresses the value of the base currency.|
- EUR - euro, base currency.
- USD - US dollar, quote currency.
All currency pairs are unique and do not repeat in reverse order. For example, the EURUSD pair exists, but the USDEUR pair does not. As a rule, the choice of the first currency in a pair is related only to its relative value. In the EURUSD pair, the euro is more expensive than the dollar, so in them it is in the first place and is the base currency. The rules for recording currency pairs are not based on approved standards, but on the convenience of presentation and calculation.
From the point of view of a single country, the quotation of a currency pair containing the national currency can be direct or inverse. In a direct quotation, the value of a foreign currency is expressed in the national currency, in a reverse quotation - vice versa. That is, for Japan, the USDJPY pair is a direct quote, and for the European Union EURUSD is an inverse.
In the global foreign exchange market, the concept of a national currency loses its meaning, but the US dollar still remains the main reserve currency, therefore all pairs containing the US dollar are called forward rates (not to be confused with forward and reverse quotes). Currency pairs that do not include the US dollar are called cross rates.
The exchange rate is the price of a monetary unit of one country, expressed in the number of monetary units of another. Actually, the very word "currency" comes from the Italian "valuta" - "value".
100 years ago, the value of money was determined by the amount of gold reserves held by the state. However, in 1929 the Great Depression began, and later the Second World War, after which most of the world's gold reserves were concentrated in the United States. As a result, a transition to a gold and foreign exchange system was made, when exchange rates began to be calculated through the US dollar, and then, in the second half of the 20th century, to a system of floating exchange rates, which is still in effect today.
Floating exchange rates are automatically regulated by market mechanisms. Under such a system, the price of monetary units fluctuates under the influence of the level of supply and demand, the volume of imports and exports, as well as the general state of the economy. Under normal circumstances, this largely allows you to regulate rates without direct government intervention and not tightly peg them either to gold or to stable currencies.
The exchange rate is one of the key market regulators of national economies. If the domestic economy becomes less efficient, the export of goods and services produced in it decreases, and following the reduction in foreign exchange earnings, the national currency depreciates. This leads to a reduction in the cost of goods produced in the country and, accordingly, the restoration of the lost positions of local producers in the export of goods and services. Countries pursuing aggressive industrial policies often deliberately undervalue their national currencies to stimulate the export expansion of domestic producers.
Transactions on the global stock market are concluded almost around the clock. But trading is divided into four global segments, during which the exchanges of individual countries and regions operate. The Asian session starts earlier than everyone else, the American session ends the day.
Trading sessions are defined periods of time when banks are actively trading. It is essential for a trader to know the schedule of trading sessions: this increases the ability to evenly distribute working hours and use it effectively. It should be noted that trading sessions on the market work in a constant mode.
All market sessions are formed taking into account the important features and nature of the trade of various representatives. Knowing the timetable will help the participant form their own suitable strategy and implement plans. Newbie traders cannot imagine when the most significant operations are carried out and a visit will bring income. You need to make not only the right deals, but also do it at the right times. This is the foundation of professional trading.
There are 4 trading sessions and each of them has its own characteristics:
|Asian session||The most active trading is the USD / JPY, EUR / USD, EUR / JPY, AUD / USD and other pairs with the yen and other Asian currencies. Currency volatility is not very high and the market is mostly calm. Currencies can make significant leaps during this session. Typically, such events can occur between 01-03 GMT.|
|European session||The beginning of the European trading session somewhat captures the end of the Asian one. In addition to the main participants, traders from other European countries are gradually joining the trading process. The main movement begins with the opening of the London Stock Exchange. Often, the opening of the session is accompanied by the release of European economic news, giving the currency movement additional dynamics. The volatility of major currency pairs sharply increases, most instruments are traded. The greatest profit can be brought by the pairs EUR / USD, GBR / CHF, USD / CHF, GBR / JPY. In addition to the euro, the British pound, Swiss franc and American dollar are becoming especially relevant.|
|American session||The movement of currencies begins to intensify with the beginning of the American trading session. Significant changes can be expected after the end of the European trading session, when American banks are left alone - during this period, even a radical change in the direction of the exchange rate is possible. Massive releases of national economic news force the currency to make multidirectional and chaotic movements. The increase in currency volatility is noticeable in the last days of the week. The most relevant instruments are with the American dollar, but GBR / CHF, GBR / JPY are also well traded.|
|Pacific session||The Pacific session is considered the quietest trading period in Forex. The most liquid assets are Australian and New Zealand dollars.|
The timing of trading should be based on your own qualities and characteristics of the trading system used. And it doesn't have to be the time in the region of residence. Inexperienced traders should be especially careful about this, for whom, in their specificity, not only not every trading session, but also some time intervals within the session may be suitable.
Timeframe is the time interval of quotes on the chart of a financial instrument.
A trading period or timeframe is used to group price quotes, which can be displayed as a broken line - a line chart, a bar - a bar chart, or a Japanese candlestick - a candlestick chart.
The name of the trading period is often used in the name of a price chart, for example, an hourly or monthly chart. To designate a timeframe, Latin letters with a numerical designation are used:
- M - minutes (M1 - one-minute chart, M5 - five-minute chart);
- H - hour (H1 - hourly, H4 - four-hour chart);
- D - day (D1 - daily chart);
- W - week (W1 - weekly chart);
- MN - month (MN - monthly chart).
Different trading platforms can have a different set of working timeframes. But each of them has the main ones: M1, M5, M15, M30, H1, H4, D1, W1, MN. These timeframes are considered classic. Technical analysis tools and trading strategies are being developed for them. During the same periods, they are tested and tuned.
A trading strategy is a method of buying and selling in the markets based on predefined rules used to make trading decisions.
A trading strategy includes a well thought out investment and trading plan that outlines the investment objectives, risk tolerance, time horizon, and tax implications. Ideas and best practices need to be learned and accepted and then adhered to. Trading planning involves developing techniques that involve buying or selling currency pairs, stocks, or other investments and can extend to more complex transactions such as options or futures. Placing trades means working with a broker and determining and managing trading costs, including spreads, commissions and fees.
There are many trading strategies and they are based on the types of analysis:
|Analysis type||Technical analysis||Fundamental analysis|
|Description||It involves studying the price chart and finding any patterns on it. Graphical analysis is one of the types of technical analysis.||It involves studying the macroeconomic indicators of the country in whose currency we trade, as well as news, income statements, etc.|
Trading strategies are used to avoid behavioral financial bias and ensure consistent results. For example, traders who follow rules about when to exit a trade are less likely to succumb to the order effect.
Features of the EURUSD currency pair
The EUR / USD pair belongs to the major currency pairs (majors) and is characterized by increased liquidity. This is not surprising since it includes two of the world's major reserve currencies: USD and EUR. It is in the euro / dollar that the largest volume of transactions is made during daily trading on the market (approximately 20% of the total volume).
The behavior of the EUR / USD pair is a kind of indicator showing the comparative state of the US and EU economies. If the US economy grows steadily, and problems arise in the EU, EUR / USD falls. Conversely, if there is a decline in growth rates in the USA, and the Eurozone demonstrates good performance, EUR / USD will grow.
The main trading characteristics of this pair:
|Active trading time||Volatility||Spread|
|The pair is traded around the clock except weekends, the most active during the European and American trading sessions.||The EUR / USD is characterized by medium volatility. During the release of important data, the pair is capable of making strong movements from 100 points and above. But in general, if you look at the historical data, the average daily volatility of the EUR / USD pair is at about 80 pips.||This is one of the main advantages of this pair. Due to the highest liquidity, the spread on EUR / USD is minimal.|
How to start trading EURUSD in Qatar
One of the main components of successful trading on the stock exchange is a trading platform. Namely they connect you with online birzhay. Therefore, it is necessary to choose the trading platform carefully and deliberately, so that the area is consistent with your trading style, market and goals.
Trading terms are programs that provide access to financial markets and allow you to make transactions online.
The specifics of trading through different trading terms are essentially different in the power of different interfaces, functions, tools. Each of them must be able to live, and this takes time and effort. But after a few repetitions, the process becomes clear, and the area is comfortable.
After choosing a trading platform, you can proceed to registration. To register, a trader needs to enter his name and surname in certain fields, come up with a password and enter an email address. After that, a confirmation letter is sent to the specified mail, in which there is a link that you need to follow. Registration is over, you can proceed to the next item.
It is important for a beginner to take a responsible approach to the start of trading. It is important to use all the available information and gradually select the most convenient ways to trade in the market. Online brokers provide on their platforms special training accounts, with the help of which a trader can work out strategies at his own pace and get used to working on the platform.
After the trader decides to start real trading, he goes to a live account by making an initial deposit. Its size depends on the online broker that the trader chooses to work with. It is important to remember that you should not deposit a lot of your own funds at once, you can start small and gradually increase your deposit.
The success of a trader depends solely on his own strengths and knowledge, so do not be lazy, you need to study all the available information and train to use it, in this case the trader will definitely succeed.