Characteristics of the currency pair EURUSD
What currency pair do the overwhelming majority of newcomers to the market start working with? That's right, it is the euro - dollar (EUR/USD) that is the most common currency pair among traders. Firstly, every person entering the world currency market knows about both EUR and USD. You may not be aware of the banknotes of Japan, Switzerland, England and so on, but almost all people are aware of Europe and the United States. Secondly, it is the EUR/USD pair that is most often discussed on various forums for traders. Thirdly, this currency pair also has the lowest spread and the highest intraday volatility.
What do you need to learn about currency pairs?
It is customary on the market to designate a currency according to the international standard ISO 4217, that is, a three-character code.
At any exchange office, you can notice that the stands always show two numbers: the purchase price of foreign currency for the national currency and the sale price of foreign currency for the national currency.
A currency pair on the market is, first of all, a trading instrument that forms the exchange rate of currencies in relation to each other.
A currency pair, of course, consists of two currencies. And so that no one gets confused, there are concepts of base and quoted currencies. Now let's talk about what they mean.
The base currency is that, the unit price of which is measured in the units of the second currency (quoted). Roughly speaking, it is the main currency in a currency pair.
The quote currency is the currency in which the unit price of the base currency is expressed. In a currency pair, the base currency is first recorded, and the second is the quoted currency.
The price chart always reflects the change in the price of the base currency in relation to the quoted one. That is, if the price moves up on the price chart of the EUR / USD currency pair, it means that the euro is becoming more expensive against the dollar. And if the price moves down, then on the contrary, the euro depreciates. This is important information that every investor and trader needs to remember.
It is hard not to notice that in some currency pairs the US dollar is the base currency, and in some it is quoted. In the Forex market, this is called forward and backward quotation.
Direct quotation is a currency pair in which the quoted currency is the US dollar and the base is any other currency. An example of currency pairs with direct quotation: GBP / USD, EUR / USD, NZD / USD.
A reverse quote is a currency pair in which the US dollar acts as the base currency, and the quoted currency is any other currency. An example of currency pairs with reverse quotation: USD / JPY, USD / CAD, USD / CHF.
There are also currency pairs without the participation of the US dollar and they also have their own name.
A cross rate is a currency pair in which the base and quote currencies are any foreign currency other than the US dollar. An example of currency pairs called cross rates: EUR / CHF, GBP / JPY, AUD / CAD.
Exchange rates
The exchange rate means the price of the currency of one country relative to the currency of another country.
The official currency rate is usually the stock exchange rate at a particular point in time. The need for such a fixation is due to the fact that the official exchange rate is used for accounting and other officially regulated procedures, and on a particular day should be the same for all users.
Trading sessions
A trader who trades on the market, with the availability of start-up capital, can quickly earn profits and increase his capital. However, for this, he must know the basic rules, as well as the time during which he must trade. This knowledge allows you to create an effective strategy and successfully implement it.
Newbies have no idea how important financial transactions are made and what trading time can bring the maximum profit. It is important not only to make the right bet, but also to choose the right moment for this. This is the main professional trading on the exchange.
Novice traders may think that trading is available every day at any time of the day, but in reality this is not the case. The exchange platform is indeed available for visiting around the clock, but trading operations are carried out at specific periods. In this regard, it makes no sense to continuously spend time at the monitor and trade on all transactions in a row. It is worth paying attention to a certain period of time to achieve the expected result.
Trading sessions are the periods of time between the opening and closing of trading. The formation of the working hours of the market depends on the activity and characteristics of some countries and continents.
The market opens at 00:00 on Monday and closes at 23:00 on Friday, European Central Time (ECT - GMT + 1 time zone). Most of the terminals of dealing centers are set at this time.
Forex schedule is cyclical - trading starts in Sydney and Wellington and further, following daylight hours to the west, captures all the world's largest financial centers. Two hours before the close of trading in Chicago, they reopen in Sydney. This continues all week until Friday evening.
This is how the schedule of trading sessions looks like:
| Session | Time | Cities | ||
| Asian | 01:00 - 09:00 | Tokyo, Hong Kong | ||
| European | 07:00 - 16:00 | Frankfurt, London | ||
| American | 14:00 - 23:00 | New York, Chicago | ||
| Pacific | 21:00 - 05:00 | Wellington, Sydney |
Trading timeframes
A timeframe is a time period during which quotes are grouped and various graphic elements (bars, candles) are formed. Thus, by the size of the timeframe, you can find out how much time will be spent on the formation of one candle.
The letter denotes a time interval:
- Minute - written with the letter M
- Day - goes under the letter D
- Month - written in letters MN
- Week - indicated by the letter W
The number indicates a specific numerical value of the interval - M1 - 1 minute, M15 - 15 minutes, W1 - 1 week.
The following main timeframe values are traditionally used:
- M1 - intended to indicate a one-minute interval
- M5 - serves to indicate a five-minute timeframe
- M30 - 30 minute period
- H1 - timeframe, which determines the time interval of 1 hour
- H4 - shows the timeframe at 4 o'clock
- D1 - needed to display the daily interval
- W1 - weekly timeframe
- MN1 - value of the trading period of 1 month
Trading strategy
A trading strategy is understood as a set of rules according to which the work on the market is carried out. This set of rules describes the conditions under which trades are executed, and also includes rules for money management, placing stop loss and take profit orders, etc.
| Strategy | Description | |
| Indicator trading strategy | The main role is given to indicators. There is a risk that the strategy will cease to be profitable due to the fact that the indicator settings are no longer relevant. Optimization is possible, but doing it manually is not so easy. | |
| Based on graphical analysis | These market strategies are based on charts and market patterns. This category of trading strategies does not become obsolete over time. | |
| Based on Japanese candlesticks | Also do not become obsolete. | |
| Based on wave analysis | A rare type of strategy, usually wave analysis is used in order to get a general idea of the market situation, but not to find the points of conclusion of transactions. | |
| News strategies | Most often, trading is carried out in an attempt to catch the price movement after the news release. That is, the trader is trying to catch the impulse price movement. |
Features of the EURUSD currency pair
The small size of the euro - dollar spread is primarily associated with the maximum liquidity of the instrument in the entire market. Since the largest trading volume on the market is observed in EUR / USD, companies providing services to traders can afford to reduce the spread.
At the moment, when working with the most popular instrument on the market, you will have to pay an average of 2-3 points for each transaction. All other currency pairs in most cases have a significantly larger spread size.
The couple only seems easy to handle due to its constant movements in one direction, then in the other. In fact, increased volatility only creates the illusion of simplicity in analyzing price behavior.
In reality, however, everything turns out to be much more complicated. During the period of learning to trade in the market, a person likes the euro - dollar for the constant movement, for the high dynamics of the quotes curve. In such conditions, you can quickly receive signals to open trading positions when trading intraday. Such a frequency of signals turns out to be very useful for those speculators who have just started their career as a trader, who want to make as many transactions in the market as possible in order to quickly understand what is happening.
How to start trading EURUSD?
To start trading, an investor or trader needs to choose a platform provided by an online broker to enter the exchange. The site must meet certain conditions:
- Convenient and intuitive interface.
- Availability of various training materials.
- Acceptable minimum deposit amount.
- A wide range of assets.
- Complete selection of indicators.
- Round-the-clock support service.
The registration process on the site should not be complicated, usually it does not take much time, you need to provide an email address, name and come up with a password. A confirmation letter of registration will be sent to the specified address.
Then you can move on to trading, but if a novice trader has not yet worked out the strategy and understand the platform, then he can use a training account with fictitious funds provided by an online broker.
After the trader learns how to use the trading platform and chooses a strategy that is convenient for himself, he can switch to a real account. This requires an initial contribution. Its size depends on the chosen online broker, so you should pay attention to this when choosing a broker.
Then it remains only to start trading and receive income. Trading doesn't seem to be such a difficult process after you try it.
