How to Make Money Trading EUR/USD?

Trading currencies has been with us for a long time. Binary options trading is a fairly new frontier considering that it has not reached its peak yet; it is still in the growth phase as there are many people all over the world who do not even know it exists. For those in it, it a good way to make money by making trades from their shifting values in relation to one another.

In traditional forex trading, you actually buy the currency when its value has dropped and sell it when it rises and trades of that nature. This is what most people will tell you about forex trading. Binary options trading on the other hand, is making trades on the value of currencies but you do not buy the actual currencies. You trade in binary option pairs.

Best way to trade  EUR/USD pair is with binary option robot. Get this fully automated trading software for free by clicking on the button below, and start making money while you sleep!

Binary Option Pairs

This is also referred to as ‘pairs trading’. In this type of trading, you will make predictions on the relative behavior of one currency as compared to another within a predetermined period of time. To put it simply, you select two currencies and put them in competition. You then predict the changes in value of one of the assets against the other. The value can either rise or fall within the predetermined period. A correct prediction is what makes you a profit while a losing prediction loses you your investment in that particular trade.

Binary trading is considered as one the ‘Market Neutral’ trades because you can make money whichever direction the values go.

eurusd

EUR/USD is the most popular currency pair

Trading EUR/USD pairs

This is the most traded pair in binary options trading today and trend looks likely to continue for the foreseeable future. It juxtaposes the Us Dollar against the EU Euro. The two are the most liquid currencies today in the global currency markets and this adds to their popularity with binary options traders. The two are also the most traded currencies in the traditional forex markets.

Like in the more widely known currency trading, the economic fortunes of the United States and that of the Eurozone countries play a big part in the value movements off these currencies. That is not to imply that they are immune to the happenings in the economies of the rest of the world. An event in the major indices in Asia is likely to cause more than just ripples in the USD and EUR values.

Considerations prior to trading the EUR/USD

Since you cannot trade blindly or make guesses on which way to trade this pair, there are a few general factors that you should take into consideration. This is before considering the other more specific news and events that can influence price changes. These factors are:

  • Trading time differences make binary options trading tricky and interesting at the same time. The North Atlantic trading sessions open a good number of hours after the Asian markets open. This means that if you are trading in the American and the European session you need to make short expiry times with this pair while avoiding the Asian currencies or making longer expiry times over short ones with this group.
  • The Asian session is usually a little slow for the American and European currencies. This means you should take longer expiry times on this pair.

What makes price shifts in the EUR/USD pair?

People always talk about how one currency can sneeze and another thousands of miles away catches a cold. This is true with the EUR/USD pair, but the analogy of sneezes and colds is not something that happens all the time. Economic news out of both Europe and the US will not make big changes in the pair, but there will be changes all the same and traders can make trades with these changes which will change from time to time according to what is happening in both economic zones. The fortunes of those countries’ economies are hardly recognizable from daily news unless there are major events with a significance implication to those two economic zones.

What brings out more pronounced changes is the economic releases or announcements by various bodies in both zones about key economic performance indicators like changes in interest rates, unemployment figures, changes in value of production, consumption and exports.

How to make money trading EUR/USD

Best way to make money trading EUR/USD is with binary option robot

Key economic releases to watch in Europe

Among the key releases that you should watch out for in Europe that are likely to cause some changes in the values of the EUR/USD are the following:

  • Consumer Price Index (CPI): This is the most important performance indicator to come from the Eurozone. It is a report on the situation in Eurozone as regards inflation and what the European Central Bank (ECB) is doing to support positive results or to counter negative results. It is the main determinant of what the ECB will do to shape the short-term and long-term monetary policy.
  • Purchasing Manager Index (PMI): This indictor will show the performance of a sector in terms of expansion and contraction. This will influence ECB’s decisions arising from the data.
  • Gross Domestic Product (GDP): This release follows a meeting of top Eurozone economists every month and the data from such meetings shows the relative situation in the Eurozone economies.
  • Unemployment figures: These too are performance indicators. An increase in new jobs or their retention is a good indicator while loss of jobs and increased unemployment rates is not.

Key economic releases to watch in United States

The US economy is the largest in the world and so it is expected that there will be many releases on the state of the economy and its various sectors each and every month. These releases are also expected to have an effect in global indices as well as the currency markets including the EUR/USD pairings. These are the key releases you should watch out for:

  • Interest rates: There is always excitement and consternation in equal measure every time an announcement on the raising or reducing interest rates is imminent. The announcement usually causes movements in price as traders shift positions on the likely outcomes.
  • Jobs data: Unemployment rates, job losses and creation of new jobs are key indicators of the state of the economy and this will influences the dollar value in relation to the Euro and other currencies as well. This is especially so for the Non-Farm Payrolls data.
  • Consumer Price Index: As in Europe, this release is important too as an indicator of the state of the economy.
  • Others: Other important releases to watch are: Retail Sales, Institute for Supply Management, GDP, Producer Price Index, Durable Goods Orders, and other releases.

All these releases assist traders to make informed choices when they are trading the EUR/USD pairs. Of importance is any release by the ECB and the Federal Reserve.

The behavior of the EUR/USD in relation to releases, news and events

Market volatility is to be expected at all times. It is only the level that changes between high and low. There many factors that determine how the EUR/USD pair behaves and this will include the time the release, news or event happens, the reasons for their happening and the financial implications of such factors. These are what you will need to collate, synthesize and analyze to enable you to come up with more winning trades than losing ones on this pair, and this is essence of all binary options trading.

Trading with brokers and robots

Trades and robots will promise to give you winning signals so that you can make profits with your trades. They use the same indicators noted above but they have the added advantage of having created algorithms to help them with all the analyzing and synthesizing. This is where they will always have one on you when it comes to binary options trading. The signals they promise will give winning trades in most cases if you are trading with the right brokers and platforms. Issues of scams abound and a careful selection process is demanded of you if you do not want your investment to fall into the wrong hands.

Trading with the EUR/USD pair is preferred by most traders in the binary options market because it is always rising and falling. During the NorthAmerican and European trading sessions, traders who prefer short expiry periods for their trades have a busy time. The volatility makes it an interesting place to be as the values change rapidly, sometimes in periods as short as 60 seconds. In the Asian trading sessions, traders in the EUR/USD will be experiencing a lull of some sort. At this time they will mostly be making longer term expiry periods because the movement in values is not as rapid as it is during the North American sessions.

With the expected growth and expansion of binary options trading in both the players (traders, brokers and trading platforms) and in the traded volumes, the EUR/USD pair will continue to dominate proceedings in the currency markets. The best thing is to ride with it and always keep watch of the main indicators as well as the releases from both economic zones.

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References and Further Reading

Level estimation, classification and probability distribution architectures for trading the EUR/USD exchange rate

Modelling and trading the EUR/USD exchange rate at the ECB fixing

Higher order and recurrent neural architectures for trading the EUR/USD exchange rate

Forecasting and trading the EUR/USD exchange rate with stochastic Neural Network combination and time-varying leverage

Alternative volatility models for risk management and trading: Application to the EUR/USD and USD/JPY rates

Michael Allen

Michael Allen is the main author at www.binaryoptionrobotinfo.com. He holds a PhD in Economics and has worked in investment banking for 24 years.