Binary options trading is a risky market, but there are a few ways you can limit the risk. The first and most effective one is choosing the right asset for trading. Now, this might sound simple, but it’s not.
Why are we saying so? That’s because one can easily get confused when choosing between forex, indices, stocks, and commodities. Each of these assets has its advantages and disadvantages. But forex is the best among all as it has limited trading risk.
Generally, new traders choose currency pairs for trading binary options because the forex market is not that volatile. And with limited volatility, this market offers a chance to win huge profitability.
Different currency pair
If you wish to trade binary options using currency pairs, you first need to find a strong pair. Basic pairs include GBP/USD, EUR/USD, AUR/USD, USD/JPY, USD/CHF, EUR/GBP, USD/CAD, AUD/JPY, GBP/JPY, EUR/JPY, and USD/MNX.
Among the available currency pair options, most traders choose EUR/USD as it is popular and strongest. That means the chances of you winning a huge payout through this pair are very high.
But do you know the ideal time for trading EUR/USD? Or are you aware of the best EUR/USD trading strategies? Don’t worry because this post has got you covered.
How does Forex trading work?
Before you start trading currency pairs, it’s important to know a few facts about them.
- Currency pairs are written in EUR/USD form. Here, the first currency is the base, and the second one is the quote. So, EUR is the base, and USD is the quote currency.
- Another thing about currency pairs is that base currency always has a value of one. That means if the value of a currency pair, say EUR/USD is 2.34, it shows there are 2.34 dollars in 1 euro.
- The charts showing currency pairs always show the data by calculating the movement of base currency with respect to the quote currency.
- Lastly, the currency pair’s price movement is calculated in pips, i.e., the percentage in points. Here, pips are the smallest price chance that any currency pair can make.
One of the best things about currency pair trading is that it can be done 24/7. That’s because a global network of banks operates this asset.
What makes EUR/USD a strong currency pair
Among the available currency pairs, EUR/USD is the strongest, but do you know why? That’s because this pair is included in “The Major Group,” which comprises the best currency pairs from around the world.
This pair can also be traded throughout the day, which roughly translates to it having better liquidity. And a currency pair that has good liquidity also has the best price.
Lastly, this pair positively correlates with GBP/USD and a negative correlation with USD/CHF. So, if you are interested in trading it, you should register yourself with one of the best brokers, like RaceOption, IQ Option, or Quotex.
Not to mention, EUR/USD also gives you a chance to use different trading types like high/low and touch/no-touch for trading so that you can win a better payout.
Reasons to avoid trading EUR/USD
Even though EUR/USD is an excellent trading pair, a few things do not work in its favor.
First things first, this currency pair is highly volatile among the option. While trading a highly volatile asset can be profitable, in the case of EUR/USD, your winning trade can become a losing trade.
There’s a lot of things happening in the forex market. So, even if you have a better understanding of this market, you might not be able to track the speed at which EUR/USD’s price gets changed.
Secondly, if your trading style includes trading on margins, then EUR/USD is not the best asset to continue your style with. Also, this currency pair does not follow the trend.
Ideal trading time for EUR/USD
As we have already mentioned that currency pairs can be traded round the clock. But have we mentioned that each pair has a profitable time? That means if you trade the right pair in the perfect, you can win more payout.
Europe America session (13.30-16.30UTC)
American traders are most likely to trade at this hour because, during this time, important news releases are made. The releases can either bring down or move up the currency price.
It is the time when EUR turnover falls. Thus, you should stay out of the market and wait for the European market to open for trading EUR/USD pair.
European Forex session (07.00-16.30 UTC)
Generally, the trading movement of currency pairs depends on the Asian traders since they fix the profit and loss.
America (13.30-20.00 UTC)
If you want to trade dollars, this is the best time. That’s because, at this time, the currency moves from euro to dollar.
Winning trading strategies for EUR/USD
Along with trading at the right time, a few other things can improve your chances of making a winning trade. Here are three of them.
As important it is to pick a good trading time, it’s equally important to choose a perfect trading duration. If you want to end the trade quickly, 5-minute trading is great. Otherwise, you can even select from 30-minute trading, weekly, or all-day trading.
Trading currency pairs throughout the day are possible, but it’s not advisable.
Narrow pattern ranges
Another way to limit the risk is by entering the market during narrow pattern ranges. At this time, the volatility is less since the currency pair drops or climbs and then falls dormant from its position.
Follow news trends
Trading during a major news event regarding currency pairs can be profitable, but it’s riskier. So, always keep a tab on the financial news and currency market.
Whether you are a beginner or a professional trader, investing in EUR/USD can help you earn a better payout. But this currency pair also has certain drawbacks.
So, what you should do is, before starting the trade, understand the price movement of this currency pair. Then, you can check its history and the risk. Lastly, based on your analysis, create a winning trading strategy.