BENEFITS OF TRADING THE EURUSD PAIR: HIGHER POTENTIAL TO PROFIT

The best currency pair that traders are advice to concentrate on trading is the EURUSD. There are several justifications why trading in the EURUSD currency pair is the best way to go. 1) Volatility: Volatility is a measure of trader activity. Profits can only be made in forex trading when there is reasonable volatility. The more volatile a currency pair is, the more chances are to profit. The EURUSD shows maximum volatility when compared to other currency majors. It is not hard to see why this is the case. The USD is the global reserve currency, as all traded commodities and international transactions are USD-denominated. The Euro, being the single currency of the 14 Eurozone member states, ensures an avenue where this huge array of countries that make up a large percentage of the world’s trade volume, can be exchanged for goods and services. 2) Economic and Trade Related Activity: This is highest in the US and the Eurozone, therefore it is not a surprise that the two currencies that make up the EURUSD are the most traded in the foreign exchange markets. 3) Liquidity: When a market is liquid, it means that there are ready buyers and ready sellers. This is the best kind of market. When a market is liquid, transaction costs are low and trades can be process at once. Due to the fact that the EURUSD is the most traded currency pair in the forex market, the transaction costs or the spread (the difference between the buying price and selling price) is the lowest of all the currency pairs. This makes sure traders maximize profits. The spread for the EURUSD for some brokers is 0.8pips while that of the EURCAD is typically 10 pips or more. This may not seem important for small traders, but when an institution is trading volumes of 1000 lots (a value of $10,000 a pip), it becomes very significant. 4) Predictability: The EURUSD is a very predictable currency pair. Since the ECB’s monetary policy thrust is straightforward and unambiguous, the factors that affect the value of the Euro are pretty much straightforward and easy for traders to use for trading decisions. The same can be said of the USD. With an ample supply of political and economic news coming from the US and the Eurozone, a trader can predict the direction of the EURUSD and trade accordingly.