When trading EUR/USD, it is important to consider many factors, including your broker’s spreads and commissions, the pair’s volatility, and your risk tolerance. EUR/USD is amongst the top most liquid pairs, meaning this pair undergoes a large amount of trading activity which typically allows EUR/USD brokers to offer tight spreads for trading it. However, not all brokers are worth opening an account with. While some brokers may offer special bonuses or promotions for trading EUR/USD, others might come with transparent trading conditions and a robust regulatory framework, making them safe and reliable.
This guide will highlight factors you must consider for choosing the best broker to trade EUR/USD and list some pros and cons of trading the pair. You will also find different ways to invest in the EUR/USD besides becoming aware of the associated risks of trading it. A brief explanation of trading EUR/USD on MT4 and some other platforms and why EUR/USD brokers need to be regulated is also a part of this guide.
Why is EUR/USD so Popular?
One of the main reasons behind the EUR/USD popularity is that it offers enough volatility for a skilled day trader to make the best of it. While the market may be slow or lacklustre on certain days, you usually have ample possibilities to make your trading day worthwhile. Since the EUR/USD pair belongs to the world’s two largest economies, traders usually consider economic factors from both the Eurozone and the United States when trading EUR/USD. For example, if the US Federal Reserve is raising interest rates, this will usually cause the USD to strengthen against other currencies. However, if economic data from the Eurozone is stronger than expected, the EUR/USD could rise. Furthermore, most EUR/USD brokers offer tight spreads for trading the fibre, making it an appealing choice for traders.
Ways to Invest in EUR/USD
There are three main ways to invest in EUR/USD: day trading, long-term investment, and buying & keeping the actual currency. Here is a brief explanation of each of them:
Day trading EUR/USD involves buying and selling the currency pair on the same day in an attempt to make a profit from the short-term price movements. This can be a risky strategy, as currency prices can be very volatile, but if done correctly, it can be profitable. Moreover, you can always use leverage to enhance your market exposure. That means a beginner trader with a modest retail account can effectively trade with significantly more capital than they actually have at their disposal. For instance, If you use a leverage of 1:30 and put up $5,000 to trade, you potentially control $150,000 in value. However, leverage also comes with a greater risk of loss. Regulated EUR/USD brokers typically do not offer leverage of more than 1:30. Therefore, you must also be very careful when leveraging your positions and try to keep it as low as possible.
Some investors think it’s wiser to trade EUR/USD over the long haul than from day to day. Greater earnings are cited as one of the long-term benefits of investing in the pair. However, results might vary widely from one trader’s experience to another. Thus this cannot be taken as a universal norm. Traders using a long-term strategy make purchases predicated on future projections and base their exits on current market conditions.
Buy and Keep the Actual Currency
For those interested in a long-term investment, buying and holding the actual currency (either EUR or USD) is one way to do this. This strategy is less risky than day trading, as you are not trying to time the market movements but simply investing for the future. Of course, this method also requires patience, as it can take months for your investment to pay off.
Pros and Cons of Trading EUR/USD
- High Volatility
- Rapid Movement
- Automated Competition
Risk Associated with Trading EUR/USD
Since we’ve already listed the cons of trading EUR/USD, explaining them in detail could help you understand better the risks associated with trading EUR/USD.
The Euro (EUR) is prone to political risks and events such as elections or referendums, which can cause large swings in the EUR/USD exchange rate. Furthermore, the EUR/USD exchange rate is also affected by changes in interest rates. If the US raises interest rates, this will usually cause the EUR/USD exchange rate to fall quickly, making it a riskier tradable asset.
While the EUR/USD is well-known among seasoned traders for its volatility, newcomers should be aware that the increased risk of trading this pair comes from its unpredictable patterns. This forex pair is notoriously confused because of its false signals and breakouts, making it a little ambiguous pair to trade.
Despite having access to advanced and real-time quotes, the use of automated systems is continuously increasing. Remember, more and more trading algorithms compete with you for investment capital in EUR/USD these days. Despite how good you are at analysing and responding to a rising market using interactive charts, robots can act way faster to leave or enter a position than you do when predetermined conditions are met, thereby increasing the automated competition for trading the EUR/USD.
Factors to Consider when Choosing Your EUR/USD Brokers
Traders who have complete faith in their broker are able to devote their full attention to improving their trading skills. However, it can be challenging for traders to determine which broker is the most trustworthy among the many available on the foreign exchange market. Below, we’ve outlined some of the more salient factors you should consider when you look for the best EUR/USD brokers.
A forex broker’s regulation is a crucial factor in determining how trustworthy it will be as your trading partner. In order to build confidence with its clients, a broker should be regulated on both the national and international levels. For instance, both the Cyprus Securities and Exchange Commission (CySEC) and the UK’s Financial Conduct Authority (FCA) recognize eToro as a legitimate brokerage firm. That explains why some of the best reviews online are eToro Broker User Review and Ratings. Talk of user confidence.
Remember, even if a broker claims to have been regulated by a highly reputable regulatory authority like NFA, FCA, or ASIC, cross-checking its licensing status is important. You must verify if your broker actually holds permission from any of the listed regulators. While you still can’t be rest assured of the safety of your funds, you have the right to pursue legal action against your broker if you find it to have violated the code of ethics.
Brokers with a solid reputation among investors are more likely to act honestly and forthrightly when dealing with their clients. In addition to reading client feedback on platforms like Reddit and Quora, you may research the company’s standing on sites like Trustpilot, Forexpeacearmy, etc. Sometimes personal recommendations also help in finding the best EUR/USD brokers.
EUR/USD Fees and Commission
To accommodate traders looking for diverse trading strategies and budgets, brokers provide a range of account types with varying commission rates. For example, your broker may tack different fees on your trades, including overnight financing, account maintenance, and currency conversion fee. Therefore, you should check and compare brokers to evaluate their cost structures and learn how they make money before signing up with any of them.
The spread is the difference between an underlying asset’s “bid” and “ask” prices. Although many brokers advertise exceptionally low spreads, a select few brokers offer them for real. It’s also important to note that brokers have different policies about how much they charge for spreads. Some brokers charge a fixed spread regardless of market conditions, while others do not. To determine if your potential EUR/USD brokers are competitive, you should always compare the spreads they offer and select the one with a low EUR/USD spread.
Margin trading, often known as “leverage,” can be used to enhance a trader’s market exposure. But it can also magnify setbacks. In some countries, such as the United Kingdom, Australia, and Europe, local regulators set the maximum leverage and keep it the same for all brokers; 1:30. On the other hand, some EUR/USD brokers offer a leverage of up to 1:1000 where such restrictions do not exist. Though some brokers claim to offer high leverage to help you increase your market exposure, they could probably be a phoney brokers trying to quickly drain your account.
A trading platform enables you to connect to the market and explore potential trading opportunities. While some brokers offer custom-built trading platforms like AvaTrader, NextGeneration, and JForex, others might rely on providing third-party trading solutions via MetaTrader 4 (MT4), MetaTrader5 (MT5), and TradingView, etc. A decent trading platform must include a trading interface that is easy to use. An overly complicated trading interface won’t do you any favours and may even affect your trading performance.
Clients can fund their accounts with EUR/USD brokers using a variety of payment methods like debit cards, credit cards, e-wallets (such as Skrill, PayPal, Neteller, etc.), and bank transfers. When it comes to making deposits and withdrawals, different brokers have various policies regarding fees. Some brokers will only charge a fee when you make a withdrawal, while other brokerages may provide this service for free. While selecting a payment method, make sure to analyse the associated fees for each option, and then go with the one that will cost you the least.
Any given service could have downtime for any number of reasons, including platform issues, incorrect pricing, incorrect account statements, and so on. No broker is completely safe from these kinds of problems. Therefore, traders must confirm if their selected brokers are accessible and transparent in their dealings with them. Also, make sure your prospective broker can communicate with you in your local language.
What Trading Platforms/Apps Can You Use to Invest in EUR/USD?
While numerous trading platforms and apps are available to invest in EUR/USD, the best is the one that fits your trading style. Typically, brokers that offer the EUR/USD pair also offer both custom-built trading apps and third-party trading platforms to facilitate their clients. The industry’s most renowned trading platforms include MetaTrader 4, MetaTrader 5, and TradingView. However, these platforms are powered by third-party vendors, like MetaQuotes and TradingView Inc.
On the other hand, brokers like eToro, and the Capital.com trading platform provide their clients with a personalised trading experience via their proprietary trading terminals. Let’s quickly check out some of the features accessible through each of them.
Trading EUR/USD on MT4 Trading Platforms/App
MetaTrader4 (MT4) is a highly respected industry standard platform for trading foreign exchange (Forex) and stocks. It is used by the vast majority of forex specialists and trading professionals, and many brokers support MT4 because of its powerful features and expanding popularity.
For the most part, MT4 is the fastest trading platform available because it initiates transactions as quickly as the best forex brokers execute them. No doubt, latency issues can have a devastating effect on your trading results, as you may miss a trading opportunity due to late order execution. Additionally, MT4’s remarkable flexibility allows clients to tailor it to their trading preferences, so they may enjoy trouble-free trading round-the-clock.
You can keep up with the market on MT4 because it is compatible with practically all indicators and chart functionalities required for meaningful trading of the EURUSD pair. Also, the ease of accessing your positions anytime, anywhere, using Android or iOS-based mobile phones and tablets makes it even more appealing for on-the-go traders.
Trading EUR/USD on MT5
MetaTrader5 (MT5) is a multi-asset platform introduced by MetaQuotes in 2010. While MT5 is a significant improvement over its predecessor, MT4, in terms of speed and efficiency, it cannot replace MT4 because traders seem to be more comfortable with MT4 than MT5, and the fact it offers nothing but additional features. The number of currencies, commodities, stocks, indexes, and cryptocurrencies available for trading has been expanded with the release of MT5.
With MT5, you have access to 38 pre-built technical indicators and 44 graphical items. While trading signals, automated robots, and copy trading are just some of the features available in MT5, the platforms come equipped with all the necessary tools helpful in performing detailed technical and fundamental analyses on the EUR/USD pair and other financial instruments.
MT5 also features an economic calendar that details major macroeconomic events. Traders can use this to monitor upcoming market events that may have an effect on the EUR/USD exchange rate or other underlying assets.
Proprietary Trading Platforms
After witnessing the growing demand from traders for programmable trading apps, EUR/USD brokers and other financial intermediaries came up with the idea of providing traders with their very own custom-built trading platforms. eToro and Capital.com were two of the pioneering brokerages to introduce specialised trading platforms to the marketplace.
eToro is a trusted platform for trading the EUR/USD pair as well as other tradable assets, and it has millions of users. While the eToro News Feed has lively discussions that users may participate in, the diverse selection of investment and trading opportunities and the social trading features of the platform are exceptional in their own right.
On the other hand, Capital.com’s web-based proprietary trading has a user-friendly interface besides being fully equipped with basic and advanced trading tools. The explorer tool provided by the broker is helpful for quickly determining which forex pairs have the highest liquidity and for getting a general sense of the market as a whole.
Spreads on EUR/USD
When it comes to the forex market, spreads are crucial. Multiple intriguing questions emerge when we evaluate average spreads in relation to the typical daily shift. To begin with, some forex pairs are better to trade with than others. Remember, a wider spread does not always indicate that a forex pair is not suitable for day trading. In the same vein, a tighter spread isn’t necessarily preferable to a wider one while trading. We will review the EUR/USD spreads offered on two different account types, Standard and Raw, in this section.
Standard Spread EUR/USD Accounts
EUR/USD fall in the category of low-spread forex pairs. Typically, most EUR/USD brokers offer an average spread of 1.5 pips on EUR/USD, depending on market circumstances and the type of account you use. For instance, the spreads available to those with standard accounts may be higher than those having raw spread accounts.
Raw (Zero) Spread EUR/USD Accounts
Although some brokers offer a raw (ZERO) spread on EUR/USD as low as 0.1 pip, the commission fees associated with zero-spread accounts are generally greater than those associated with conventional spread accounts, which can add up to a significant difference in the overall trading cost.
Why EUR/USD Brokers need to be Regulated
Indeed, forex trading has become the most important part of the world’s financial system. Although the regulation of the foreign exchange market is difficult because of the system’s decentralised nature, regulatory authorities require entities entrusted with public money to follow best ethical practices. Essentially, a lack of government oversight would make it too simple for brokers to take their clients’ money. Licensed EUR/USD brokers not only ensure liquidity but also employ state-of-the-art security procedures to keep their clients’ money and information safe.
However, the regulation doesn’t guarantee the safety of your funds since scammers always find new tricks to loot investors in places with inadequate surveillance. So the possibility of fraudulent transactions remains. For instance, shady brokers who break the code of ethics often choose to incorporate in an offshore location like Belize, Vanuatu or Saint Vincent & the Grenadines, etc.
That’s why it’s important to only deal with brokers who have been licensed by respected regulatory bodies like the National Futures Association (NFA) in the US, the Australian Securities and Investments Commission (ASIC) in Australia, and the Financial Conduct Authority (FCA) in the UK, etc.
What Reddit and Quora Say About EUR/USD Trading
Reddit seems flooded with discussion threads on trading EUR/USD. While the majority wants to know the pair’s upcoming trend, some members seem curious about the risks associated with trading it. Overall, the morale of the Reddit community looks a little down amid trading EUR/USD. It appears that the members need more confidence about the ongoing developments of the pair to open a position.
While sharing his view on the macroeconomic outlook of the pair, a member on Reddit explained that Europe now has no fundamental advantages. It’s all terrible news, from an impending recession to the possibility that Russia would shut off the EU gas supply this winter. According to him, there is no point in holding the EUR/USD pair for the long term since the USD is rising due to significant recessionary potential and the Fed’s ongoing tightening of monetary policy. He further said that although the technical indicators show a breakout is developing, the prevailing trend is still strongly bearish.
You may find numerous EUR/USD trading-related posts on Quora. Due to the prevalence of speculation in the forum, we sought out people’s general opinions on the EUR/USD trading market. The Quora community has diverse views on whether or not one should trade EUR/USD. While the major seems to favour the pair due to its increased liquidity and accessibility, some members believe trading it can be riskier. Some investors avoid trading the EUR/USD because of the pair’s historical volatility and recent fluctuations.
In response to a query concerning the best strategy to trade EUR/USD, a member replied, “the short-term strategy”. He said the extreme volatility of the EUR/USD pair and the relative ease with which one can “scalp” a profit from the market makes short-term tactics more appealing, especially during the New York trading period.
When trading EUR/USD, both fundamental and technical research is important. You should consider various factors, ranging from central bank pronouncements and economic releases to the selection of the best EUR/USD brokers offering tight spreads and competitive pricing structures. Furthermore, the time to trade is also critical when it comes to trading the cable. Successful forex traders know the importance of timing their trades. Even if the market is open around the clock, it’s more important to make high-quality deals than to make lots of them.
In this article, we covered almost all aspects of trading EUR/USD, ranging from its quick introduction and summary to explaining the reasons behind its popularity and highlighting different ways to invest your funds in it. We listed the pros and cons and the risks associated with trading EUR/USD and discussed some crucial factors you must consider to find the best EUR/USD brokers. We also reviewed some facts for trading EUR/USD on MT4 and other platforms and shared what people think of the pair on platforms like Reddit, Quora, etc.
Lastly, we compiled the most frequently asked questions to help you access your desired information quickly. We believe reading this guide has helped you understand the pair in-depth and equipped you with all the necessary information required for trading the fibre confidently.
Q & A
There are several EUR/USD trading brokers, each of which claims to be the best. But among brokers, eToro and capital.com stand out as the two most formidable rivals. However, we caution against joining until you’ve investigated them and are confident with your choice.
The best time to trade EUR/USD is between 08:00 and 22:00 GMT when both London and New York are open for business. Trading at this time will give you the best chance of making the most of it.
Both eToro and Capital.com come loaded with the best tools for EUR/USD technical analysis.
According to statistics shared on a third-party website, EUR/USD is the third most volatile pair, with an average daily volume of around 48.7 pips. However, the results are subject to change. Notably, the EUR/USD pair is among the top most volatile pairs in the forex market.
The average daily pips movement of EURUSD has been recorded as 95 pips, with the most significant daily range being 217 pips (on June 16, 2022) and the lowest daily range being merely 34 pips. In 2022, the average daily pips volatility for EUR/USD was 95 pips (April).
Per the data available on MyFxBook, Pepperstone offers the lowest spread on EUR/USD. Clients can trade the pair for a spread as low as 0.0 pips.
The highest price of EUR/USD was 1.2420 USD on Jan 26, 2018, over the last five years.
Economic and political developments in the United States and the Eurozone drive the EUR/USD exchange rate the most. Moreover, the spread is susceptible to moves made by the US Federal Reserve and the European Central Bank.
Yes! Brokers who deal in EUR/USD charge a commission. Commissions charged by forex brokers are often comparable to those set by stockbrokers.
The most appropriate leverage for trading EUR/USD is that which does not result in account closure. You may employ leverage to get more market exposure, but be aware that too much leverage might lead to a catastrophic loss.
EUR/USD brokers dealing under government regulation allow maximum leverage of up to 1:30. However, you may access leverage of up to as high as 1:1000 when trading EUR/USD pairs with some offshore brokers like FBS.
Variation exists between EUR/USD brokers concerning the required minimum deposits. The minimum opening amount required by some forex brokers is $50, while others will accept as little as $1.
Yes! With its high daily trading volume and tight spreads, EUR/USD is a great forex pair for traders of all skill levels.