Understanding the USD/EUR Trading: A Beginner’s Guide
Have you ever thought of online trading as an additional source of income? While professional traders constantly learn and analyze currency pairs, you can start with the easiest and the safest asset. The EUR/USD is the most stable and secure currency pair.
As a beginner, see how to begin with this form of trading: learn the best trading periods with JM, learn the key factors to track, and manage the risk. See which factors determine the currency pair value, and which steps are essential to street your Forex trading career.
What is the EUR/USD Currency Pair?
Any form of trading means that you buy and sell assets. These can be fiat currencies, cryptocurrencies, metals, stocks, etc. The trader’s task is to buy a cheap asset and sell it once its value rises – this is a basic definition, but that’s what beginners should understand.
EUR/USD pair shows how many US dollars you need to buy one EUR. For example, the 1.2 rate means you need 1.20 USD to buy 1 EUR. By tracking the EUR rate constantly, you can determine the best period of buying and selling:
- buy EUR when its value is lowering, and you can afford more;
- sell the asset once it costs more, but manage to hit the highest point for the best profit.
Although it seems easy, dozens of factors (technical and public) determine the price and its changing pace.
Which Factors Determine the Price Ratio?
The currency rate depends on multiple factors. As a trader, you need to track all of them and make timely decisions:
- Economic situation in the US and the EU. The factor consists of several aspects: GDP growth, inflation rate, level of life, etc. You need to identify periods when one region shows a better economic situation than another one.
- Interest rates. Interest rates between the EU and the USA determine the currency ratio. For the UE interest rates are higher, EUR rises, and vice versa.
- Political events. This includes global events like elections, as well as local events: conferences, announcements, press releases, etc. These events determine public opinion and the trust rate.
- Speculations. Professional traders and market giants can speculate on the currency’s value. These short-term price changes may confuse you, and they don’t have logical reasons. Be ready to identify speculations and wait until the situation is balanced again.
You should also consider the factor called “risk appetite”. Basically, high appetite means that traders are ready for high volatility on the market and embrace potential losses (because potential wins are worth it). This is the time to sell and buy assets and make quick decisions. At the same time, this is a risky period for a beginner. New traders should focus on the low-appetite period when the market is stable.
Your Guide to EUR/USD Trading
Start your trading path by selecting a reliable and convenient broker. These are online platforms, through which you can access Forex. Good brokers have at least several years of experience and useful instruments for trading: calendars, currency rates, real-time reports, account statistics, etc. Although they may be complicated for a beginner, you’ll need analytical tools later. Consider the minimum deposit as well, as professional platforms may work with large-scale assets only. Once you choose a trustworthy platform, it is time to start:
- Do your research. Research all factors that influence the EUR/USD dynamics. Explore the current events in the world and experts’ predictions. Buy your first currency when its value is lowering.
- Set the stop-loss orders. Even professionals control the level of risk. Set the point at which your deal will be closed.
- Stay informed and constantly track the situation. Avoid impulsive decisions. Even if your asset is losing value, remember that EUR and USD are constantly changing. Wait for the right moment to sell, even if it requires time. For instance, real-time analytics shows the previous changes in the currency pair. By using this data, you can partially predict the following events.
- Try more pairs and assets. While EUR and USD are stable and safe assets, they won’t give you much profit. Practice with safe pairs and slightly turn to assets with higher volatility. Continue with pairs, containing USD and Asian currencies, for instance, JPY and CNY. Later, turn to other types of assets.
Finally, be ready for unpredictable events. Track the world news, especially within the US and Europe. Even experienced traders cannot predict political events, crises, war conflicts, and other situations that influence public tension.
Conclusion
Trading with EUR and USD can be a profitable, yet low-risk process. Although you won’t earn as much as professionals do, this is a nice way to create another source of income and practice before complicated trading strategies. Yet, be attentive and track the situation constantly. Any form of trading implies risk, and you should be ready to manage them.